Copyright and The Music Marketplace

u n i t e d
stat e s
co p y r i g h t
o f f i c e
Copyright and the Music Marketplace

a report of the register of copyrights
february 2015
u n i t e d
stat e s
co p y r i g h t
o f f i c e

a report of the register of copyrights
february 2015
U.S.CopyrightOffice
CopyrightandtheMusicMarketplace
Preface
Fewwoulddisputethatmusicisculturallyessentialandeconomicallyimportanttothe
worldwelivein,buttherealityisthatbothmusiccreatorsandtheinnovatorsthat
supportthemareincreasinglydoingbusinessinlegalquicksand.Asthisreportmakes
clear,thisstateofaffairsneitherfurthersthecopyrightlawnorbefitsanationascreative
astheUnitedStates.
TheCopyrightOfficehaspreviouslyhighlightedtheoutmodedrulesforthelicensingof
musicalworksandsoundrecordingsasanareainsignificantneedofreform.1
Moreover,theOfficehasunderscoredtheneedforacomprehensiveapproachto
copyrightreviewandrevisiongenerally.2Thisisespeciallytrueinthecaseofmusic
licensingtheproblemsinthemusicmarketplaceneedtobeevaluatedasawhole,
ratherthanasisolatedorindividualconcernsofparticularstakeholders.
WhilethisviewishardlyasurprisingonefortheU.S.CopyrightOffice,itisnosimple
mattertogetonesarmsaroundourcomplexsystemofmusiclicensing,ortoformulate
potentialavenuesforchange.Forthisreason,inearly2014,theOfficeundertookthis
studywithallindustryparticipantsinvitedtoparticipatetobroadlyconsiderthe
existingmusicmarketplace.3
Thisreportistheresultofthateffort.Inadditiontoidentifyingtheshortcomingsofthe
currentmethodsoflicensingmusicintheUnitedStates,itoffersanindepthanalysisof
thelawandindustrypractices,aswellasaseriesofbalancedrecommendationsto
improvethemusicmarketplace.
Acknowledgments
ThisreportwaspreparedbytheOfficeoftheGeneralCounsel,U.S.CopyrightOffice,
followinganexhaustiveanalysisofindustrypracticesandconsiderabledialoguewith
musiccreatorsandthebusinessesthatrepresentandinvestintheirinterests,aswellas
musicservicesanddistributorsandotherinterestedparties.Iamindebtedtothestaff
whoworkedsotirelesslyandthoughtfullytoseethereporttofruitionandamconfident
thatitwillbeamajorresourceforbothCongressandthepublic.
SeeMariaA.Pallante,TheNextGreatCopyrightAct,36COLUM.J.L. &ARTS315,33435(2013)
(Tomakealongstoryshort,Congresscouldmakearealdifferenceregardinggridlockinthe
musicmarketplace.).
SeeTheRegistersCallforUpdatestoU.S.CopyrightLaw:HearingBeforetheSubcomm.onCourts,
Intell.Prop.andtheInternetoftheH.Comm.ontheJudiciary,113thCong.6(2013)(statementof
MariaA.Pallante,RegisterofCopyrights).
2
See17U.S.C.701(b)(4)(notingthattheRegisterofCopyrightsshallconductstudiesregarding
copyrightandothermattersarisingunderTitle17ortheadministrationoftheCopyrightOffice).
3
U.S.CopyrightOffice
IdoubtthereportwouldhavebeenpossiblewithoutJacquelineC.Charlesworth,
GeneralCounselandAssociateRegister,whooversawthecomplexresearch,public
hearings,writing,andrecommendations.Itisdifficulttosaywithcertaintywhetheritis
Jacquelinesoutstandingskillsetasalawyerorherextensivebackgroundinthemusic
industrythatprovedmostvaluableforthisproject,buteitherwayshehasproduceda
reportthatisfair,rational,andforwardthinking,afittingframeworkforafieldas
culturallybelovedandeconomicallyimportantasmusicistotheUnitedStates.
IamsimilarlyindebtedtoSarang(Sy)Damle,DeputyGeneralCounsel,whoprovided
additionalleadershipandnumerouscriticalcontributions,includingdeftdrafting,
dispassionateanalysis,anddeepregardfortheintersectionofmusicandtechnology.
IamverygratefulaswellforthecontributionsofReganSmith,AssistantGeneral
Counsel,whooversawtheeditingprocessandthefinalproductionofthereport.
AssistantGeneralCounselSteveRuwehelpedwiththehearingsandprovided
substantialresearchandanalysis,especiallyintheareaofstatutorylicensing.Likewise,
AttorneyAdvisorsRickMarshallandJohnRileyassistedwithhearings,researchand
writing;Johnalsopreparedthehelpfulandimpressivechartsonthelicensingand
ratesettingprocessesthatareincludedinthereport.IalsowishtorecognizeMichelle
Choe,whoiswiththeCopyrightOfficeasaBarbaraA.RingerHonorsProgramFellow,
forhersubstantialresearchandwritingefforts.DonaldStevens,alsoaRingerFellow,
assistedwithparticularquestionsofinternationallaw,andLawClerksAndrewMoore,
KylePetersen,MarynaKoberidze,andMeganHartnettprovidedvaluableresearch
support,forwhichIamthankful.
Asalways,theCopyrightOfficereceivedsignificantandtimelysupportfromcolleagues
outsideofWashington,D.C.IsoappreciateProfessorRushHicksandLukeGilfeather
oftheMikeCurbCollegeofEntertainmentandMusicBusinessatBelmontUniversity
forfacilitatingtheroundtableheldinhistoricColumbiaStudioAonMusicRowin
Nashville.Mythanksandappreciation,aswell,toProfessorsDavidNimmerandNeil
NetaneloftheUCLASchoolofLawforhelpingtofacilitatetheLosAngelesroundtable,
andProfessorBartonBeebeofNYULawSchoolforhisassistancewiththeNewYork
Cityroundtable.IwouldparticularlyliketoacknowledgeRepresentativeJerrold
Nadler,whovisitedtheNewYorkroundtabletosharehisviewsabouttheimportance
oftheseissues.
Lastbutnotleast,Iamindebtedtothemanyorganizationsandindividualswho
providedwrittencommentaryandsharedtheirfrustrations,insights,andexperiencesin
theroundtablediscussions.Ihopethisreporthelps.
MariaA.Pallante
RegisterofCopyrightsandDirector
U.S.CopyrightOffice
U.S.CopyrightOffice
TABLEOFCONTENTS
EXECUTIVESUMMARY.............................................................................................................1
I.

INTRODUCTION..............................................................................................................12
A.
B.
II.
StudyHistory..........................................................................................................14
LicensingandRatesettingCharts.........................................................................15

MUSICLICENSINGLANDSCAPE................................................................................16
A.
B.
C.
16
CopyrightOverview...............................................................................................
1. BriefHistoryofCopyrightProtectionforMusic......................................16
18
2. MusicalWorksVersusSoundRecordings.................................................
3. KeyPlayersintheMusicMarketplace.......................................................18
a. Songwriters..........................................................................................18
b. MusicPublishers.................................................................................19
20
c.
PerformingRightsOrganizations(PROs)....................................
d. MechanicalRightsAdministrators...................................................21
e. RecordingArtistsandProducers......................................................21
f.
RecordCompanies..............................................................................22
23
g. MusicProviders...................................................................................
24
h. Consumers............................................................................................
25
LicensingMusicalWorks.......................................................................................
1. ExclusiveRightsinMusicalWorks............................................................25
26
2. ReproductionandDistributionRights.......................................................
a. HistoricalBackground........................................................................26
b. MechanicalRightsLicensing.............................................................28
StatutoryLicensing.............................................................................28
30
VoluntaryLicenses..............................................................................
RecentReformEfforts.........................................................................31
32
3. PublicPerformanceRights...........................................................................
a. ThePROs..............................................................................................32
b. AntitrustOversight.............................................................................34
DepartmentofJusticeConsentDecrees...........................................35
38
KeyAntitrustCases.............................................................................
c. ConsentDecreeProcedures...............................................................40
42
4. StatutoryLicenseforPublicandNoncommercialBroadcasting............
LicensingSoundRecordings.................................................................................43
43
1. ExclusiveRightsinSoundRecordings.......................................................
43
2. ReproductionandDistributionRights.......................................................
3. PublicPerformanceRights........................................................................43
a. LackofTerrestrialPerformanceRight..............................................
43
U.S.CopyrightOffice
b.
D.
E.
Section112and114Licenses.............................................................46
Interactive/NoninteractiveDistinction.............................................48
RatesettingStandards.........................................................................49
50
CRBRatesettingProceedings.............................................................
51
RoyaltyRates........................................................................................
c.
PrivatelyNegotiatedLicenses...........................................................52
4. Pre1972SoundRecordings.........................................................................53
SynchronizationRights..........................................................................................55
LicensingEfficiencyandTransparency...............................................................58
1. DataStandards..............................................................................................59
2. PublicData.....................................................................................................62
3. NonGovernmentDatabases.......................................................................63
65
4. InternationalEfforts......................................................................................
5. DataSharingInitiatives................................................................................66

III. CHALLENGESOFTHECURRENTSYSTEM..............................................................68
A.
B.
69
CompensationandLicensingDisparities............................................................
1. EffectofMarketTrendsonCreatorIncome..............................................69
a. FromPhysicalFormatstoDownloadstoStreaming......................
70
b. ImpactofMusicStreamingModels..................................................73
c.
NonPerformingSongwriters............................................................78
d. AdditionalConsiderations.................................................................
78
Piracy.....................................................................................................
78
ImpactofDMCASafeHarbors.........................................................79
2. DisparateTreatmentofAnalogousRightsandUses...............................81
a. InconsistentRatesettingStandards...................................................
81
b. DifferentRatesettingBodies..............................................................83
c.
Pre1972SoundRecordings...............................................................85
FullFederalizationConsiderations...................................................
85
PartialFederalizationAlternative.....................................................86
d. TerrestrialRadioExemption..............................................................87
GovernmentsRoleinMusicLicensing...............................................................90
1. PROConsentDecrees...................................................................................90
a. RoyaltyRates........................................................................................
91
b. RateCourtProceedings......................................................................93
c.
InterimFees..........................................................................................94
d. InconsistentRegulationofPROs.......................................................
95
e. PartiesProposals................................................................................96
CompleteorPartialWithdrawalofRights......................................97
EliminationVersusExpansionofConsentDecrees......................
101
RateCourtChanges..........................................................................102
BundledLicensing.............................................................................
103
EliminationofSection114(i)............................................................104
ii
U.S.CopyrightOffice
2.
C.
MechanicalRightsLicensing.....................................................................105
105
a. RoyaltyRatesandStandard.............................................................
b. AdministrativeBurdens...................................................................107
108
c.
PerceivedUnfairness.........................................................................
108
LackofAuditRights..........................................................................
AdministrativeIssues.......................................................................110
d. PartiesProposals..............................................................................111
EliminationofStatutoryLicense.....................................................111
BlanketLicensing..............................................................................112
3. Sections112and114...................................................................................114
a. RoyaltyRates......................................................................................
114
b. Interactive/NoninteractiveDivide..................................................115
c.
TechnicalLimitationsofSection112...............................................
117
d. LackofTerminationProvision........................................................117
e. RoyaltyDistributionProcess...........................................................118
4. PublicandNoncommercialBroadcasting...............................................118
5. ConcernsRegardingCRBProcedures......................................................
119
a. InefficienciesandExpense...............................................................119
b. SettlementObstacles.........................................................................121
c.
DiscoveryProcess..............................................................................
121
LicensingEfficiencyandTransparency.............................................................123
1. MusicData...................................................................................................123
a. LackofReliablePublicData............................................................123
b. PartiesViews.....................................................................................126
2. UsageandPaymentTransparency...........................................................128
a. AdvancesandEquityDeals.............................................................128
b. PRODistributions.............................................................................130
c.
PassThroughLicensing...............................................................131
IV. ANALYSISANDRECOMMENDATIONS..................................................................133

A.
B.
C.
GuidingPrinciples................................................................................................134
LicensingParityandFairCompensation..........................................................134
1. EquitableTreatmentofRightsandUses..................................................
135
a. MusicalWorksVersusSoundRecordings.....................................135
b. TerrestrialRadio................................................................................138
c.
Pre1972SoundRecordings.............................................................140
2. ConsistentRatesettingStandards.............................................................142
RoleofGovernmentinMusicLicensing...........................................................145
1. AntitrustConsiderations............................................................................
146
2. ThePROsandtheConsentDecrees.........................................................150
a. Pandora Analysis................................................................................151
PublisherWithdrawals.....................................................................151
RateDecision......................................................................................
153
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U.S.CopyrightOffice
D.
E.
155
AvailabilityofSongData..................................................................
155
b. PRORatesettingProcess...................................................................
MigratetoCopyrightRoyaltyBoard..............................................155
Section114(i)......................................................................................157
InterimFees........................................................................................157
PartialWithdrawalofRights...........................................................158
c.
d. BundledLicensing.............................................................................
160
3. MechanicalLicensingandSection115.....................................................162
a. FreeMarketNegotiationVersusCollectiveAdministration.......162
PublisherOptOutRight..................................................................164
FullMarketCoverage.......................................................................165
CoverRecordings..............................................................................166
AudiovisualUses...............................................................................
167
b. ShifttoBlanketLicensing.................................................................
169
c.
Ratesetting..........................................................................................170
AsNeededRatesetting..................................................................
171
UseofBenchmarks............................................................................
172
InterimRates......................................................................................173
d. AuditRight.........................................................................................173
e. SunsetofExistingSection115Licenses..........................................
174
4. Section112and114Licenses.....................................................................175
a. ScopeofLicenses...............................................................................176
AdjusttoIncludeTerrestrial............................................................176
QualifyingVersusNonqualifyingServices...................................177
b. Ratesetting..........................................................................................179
c.
ProducerPayments...........................................................................180
d. TerminationProvision......................................................................181
5. PublicandNoncommercialBroadcasting...............................................181
LicensingEfficiencyandTransparency.............................................................183
1. IndustryData...............................................................................................183
a. PubliclyAccessibleDatabase...........................................................183
b. AdoptionofDataStandards............................................................184
2. FairReportingandPayment......................................................................
186
a. WriterandArtistShares...................................................................186
b. BestPracticesforTransparency.......................................................
189
AnUpdatedMusicLicensingSystem................................................................
189
1. MROs............................................................................................................190
2. TheGMRO...................................................................................................192
a. DataRelatedResponsibilities..........................................................193
b. DefaultLicensingandPayment......................................................194
c.
ResourcesandFunding....................................................................196
3. TheCRB........................................................................................................197
a. NewRatesettingProtocol.................................................................
197
iv
U.S.CopyrightOffice
4.
5.
APPENDICES
AppendixA:
AppendixB:
AppendixC:
AppendixD:
b. AllInRatesforNoninteractiveStreaming....................................198
c.
GMROSurcharge..............................................................................199
199
d. ProceduralImprovements................................................................
201
RegulatoryImplementation.......................................................................
FurtherEvaluation......................................................................................202
FederalRegisterNotices
CommentingPartiesandRoundtableParticipants
Abbreviations
LicensingandRatesettingCharts
U.S.CopyrightOffice
Executive Summary
TheUnitedStateshasthemostinnovativeandinfluentialmusiccultureintheworld,
butmuchofthelegalframeworkforlicensingofmusicdatesbacktotheearlypartofthe
twentiethcentury,longbeforethedigitalrevolutioninmusic.Ourlicensingsystemis
foundedonaviewthatthemusicmarketplacerequiresauniquelevelofgovernment
regulation,muchofitreflectedinstatutorylicensingprovisionsoftheCopyrightAct.
TheCopyrightOfficebelievesthatthetimeisripetoquestiontheexistingparadigmfor
thelicensingofmusicalworksandsoundrecordingsandconsidermeaningfulchange.
Thereisawidespreadperceptionthatourlicensingsystemisbroken.Songwritersand
recordingartistsareconcernedthattheycannotmakealivingundertheexisting
structure,whichraisesseriousandsystemicconcernsforthefuture.Musicpublishers
andperformancerightsorganizationsarefrustratedthatsomuchoftheirlicensing
activityissubjecttogovernmentcontrol,sotheyareconstrainedinthemarketplace.
Recordlabelsanddigitalservicescomplainthatthelicensingprocessisburdensomeand
inefficient,makingitdifficulttoinnovate.
Whilethereisgeneralconsensusthatthesystemneedsattention,thereislessagreement
astowhatshouldbedone.Inthisreport,afterreviewingtheexistingframeworkand
stakeholdersviews,theCopyrightOfficeoffersaseriesofguidingprinciplesand
preliminaryrecommendationsforchange.TheOfficesproposalsaremeanttobe
contemplatedtogether,ratherthanindividually.Withthisapproach,theOfficeseeksto
presentaseriesofbalancedtradeoffsamongtheinterestedpartiestocreateafairer,
moreefficient,andmorerationalsystemforall.
A.
GuidingPrinciples
TheCopyrightOfficesstudyrevealedbroadconsensusamongstudyparticipantson
fourkeyprinciples:
Musiccreatorsshouldbefairlycompensatedfortheircontributions.
Thelicensingprocessshouldbemoreefficient.
Marketparticipantsshouldhaveaccesstoauthoritativedatatoidentifyand
licensesoundrecordingsandmusicalworks.
Usageandpaymentinformationshouldbetransparentandaccessibleto
rightsowners.
U.S.CopyrightOffice
Inadditiontotheabove,basedontherecordintheproceeding,theOfficehasidentified
severaladditionalprinciplesthatitbelievesshouldalsoguideanyprocessofreform.
Theseare:
Governmentlicensingprocessesshouldaspiretotreatlikeusesofmusicalike.
Governmentsupervisionshouldenablevoluntarytransactionswhilestill
supportingcollectivesolutions.
Ratesettingandenforcementofantitrustlawsshouldbeseparatelymanagedand
addressed.
Asingle,marketorientedratesettingstandardshouldapplytoallmusicuses
understatutorylicenses.
TheOfficewasguidedbyalloftheaboveprinciplesindevelopingitsrecommendations,
whicharesummarizedbelow.
B.
LicensingParityandFairCompensation
Questionsoflicensingparityandfaircompensationarecloselytiedtotherelative
treatmentofmusicrightsandrightsholdersunderthelaw.TheCopyrightOffice
believesthatanyoverhaulofourmusiclicensingsystemshouldstrivetoachievegreater
consistencyinthewayitregulates(ordoesnotregulate)analogousplatformsanduses.
Withthatgoalinmind,theOfficerecommendsthefollowing:
Regulatemusicalworksandsoundrecordingsinaconsistentmanner.The
Officebelievesthat,atleastinthedigitalrealm,soundrecordingsandthe
underlyingmusicalworksshouldstandonmoreequalfooting.TheCopyright
Officesapproachwouldofferafreemarketalternativetomusicalworkowners,
intheformofanoptoutrighttowithdrawspecificcategoriesofrightsfrom
governmentoversightinkeyareaswheresoundrecordingownersenjoysuch
benefitsnamely,interactivestreamingusesanddownloads.
Extendthepublicperformancerightinsoundrecordingstoterrestrialradio
broadcasts.AstheCopyrightOfficehasstatedrepeatedlyformanyyears,the
UnitedStatesshouldadoptaterrestrialperformancerightforsoundrecordings.
Apartfrombeinginequitabletorightsholdersincludingbycurtailingthe
reciprocalflowofroyaltiesintotheUnitedStatestheexemptionofterrestrial
radiofromroyaltyobligationsharmscompetingsatelliteandinternetradio
providerswhomustpayfortheuseofsoundrecordings.AssumingCongress
adoptsaterrestrialperformanceright,itwouldseemonlylogicalthatterrestrial
usesshouldbeincludedunderthesection112and114licensesthatgovern
internetandsatelliteradio.
U.S.CopyrightOffice
Fullyfederalizepre1972soundrecordings.Asitconcludedinits2011reporton
thetopic,theCopyrightOfficebelievesthatpre1972recordingscurrently
protectedonlyunderstatelawshouldbebroughtwithinthescopeoffederal
copyrightlaw,withthesamerights,exceptions,andlimitationsasmorerecently
createdsoundrecordings.Thelackoffederalprotectionforpre1972sound
recordingsimpedesafairmarketplace.Recordlabelsandartistsarenotpaidfor
performancesoftheseworksbydigitalservices,which(atleastuntilrecentcourt
rulingsunderstatelaw)wereconsideredfreefromcopyrightliabilityonthe
soundrecordingside.Atthesametime,theownersofthemusicalworks
embodiedinthesesoundrecordingsarepaidforthesameuses.
Adoptauniformmarketbasedratesettingstandardforallgovernmentrates.
Whileinsomecasesthelawprovidesthattheratesettingauthorityshould
attempttoemulateafreemarket,inothercasesitimposesamorepolicy
orientedapproachthathasledtobelowmarketrates.Thereisnopolicy
justificationforastandardthatrequiresmusiccreatorstosubsidizethosewho
seektoprofitfromtheirworks.Accordingly,theOfficecallsforadoptionofa
singleratestandardwhetherdenominatedwillingbuyer/willingselleror
fairmarketvaluethatisdesignedtoachieveratesthatwouldbenegotiated
inanunconstrainedmarket.
C.
GovernmentsRoleinMusicLicensing
Thegovernmentsinvolvementinthemusicmarketplaceisunusualandexpansive
relativetootherkindsofworkscreatedanddisseminatedundertheCopyrightAct.In
manycases,itcompelscopyrightownerstolicensetheirworksatgovernmentsetrates.
Regulationofmusicpublishersandsongwritersisparticularlypervasive:thetwomost
significantareasoftheirmarket(mechanicalandperformancelicensing)aresubjectto
mandatorylicensingandratesetting.Antitrustconcernshavebeenthetraditional
rationaleforgovernmentintervention.Tobesure,whereparticularactorsengagein
anticompetitiveconductinviolationofantitrustlaws,thatconductshouldbeaddressed.
Butcompulsorylicensingdoesmorethanthatitremoveschoiceandcontrolfromall
copyrightownersthatseektoprotectandmaximizethevalueoftheirassets.
Regardlessofthehistoricaljustificationsforgovernmentintervention,theCopyright
Officebelievesthatintodaysworld,certainaspectsofthecompulsorylicensing
processescanandshouldberelaxed.Thebelowrecommendationsoffersomeideasfor
howthatmightbeaccomplishedinthevariousareasofthemarketwherethereis
governmentinvolvement.
Performing Rights Organizations (PROs) and the Consent Decrees
ManyimportantissueshavebeenraisedintheDepartmentofJustices(DOJs)
parallelconsiderationoftheAmericanSocietyofComposers,AuthorsandPublishers
(ASCAP)andBroadcastMusic,Inc.(BMI)consentdecrees.TheOfficeendorsesthat
3
U.S.CopyrightOffice
review,andinlightofthesignificantimpactofthedecreesintodaysperformance
drivenmusicmarkethopesitwillresultinaproductivereconsiderationofthe75year
olddecrees.Atthesametime,theCopyrightOfficeobservesthatitisCongress,notthe
DOJ,thathastheabilitytoaddressthefullrangeofissuesthatencumberourmusic
licensingsystem,whichgofarbeyondtheconsentdecrees.Intheareaofperformance
rights,theOfficeoffersthefollowingrecommendations:
MigrateallratesettingtotheCopyrightRoyaltyBoard(CRB).TheCopyright
Officebelievesthatallegationsofanticompetitiveconductareworthyof
evaluation(and,ifappropriate,remedialaction)separateandapartfromthe
determinationoffairratesformusicalworks.Eachofthesetwocriticalpolicy
objectivesmeritsgovernmentattentioninitsownright.Accordingly,theOffice
proposesthatthefunctionofestablishingratesforthepublicperformanceof
musicalworkscurrentlytheprovinceoffederaldistrictcourtsunderthe
consentdecreesbemigratedtotheCRB.Industryratesettingis,ofcourse,a
primaryfunctionoftheCRB,andtheCRBhasthebenefitofexperienceassessing
abroaderspectrumofraterelatedquestionsthanthefederalratecourts,aswell
asspecificexpertiseincopyrightlawandeconomics.
Repealsection114(i).RegardlessofwhetherPROratesettingismigratedtothe
CRB,asfurtherdiscussedbelow,theCopyrightOfficeendorsestheproposalthat
theprohibitioninsection114(i)thatcurrentlypreventsratesettingtribunalsfrom
consideringsoundrecordingperformanceroyaltiesbeeliminated.Originally
designedasaprotectivemeasuretobenefitsongwritersandpublishers,it
appearstobehavingtheoppositeeffect.
Streamlineinterimratesettingandrequireimmediatepaymentofroyalties.
Undertheconsentdecrees,anyonewhoappliesforalicensehastherightto
performmusicalworksinaPROsrepertoirewithoutpayingthePROany
compensationpendingthecompletionofnegotiationsorratecourtproceedings
resultinginaninterimorfinalfee.Theproblemisexacerbatedbythesubstantial
burdenandexpenseoflitigatingevenaninterimrateinfederalcourt.The
CopyrightOfficebelievesthattotheextentalicensingentityisrequiredtogrant
alicenseuponrequest,thereshouldbeastreamlinedmechanismtosetan
interimroyaltyrate,andthatthelicenseeshouldhavetostartpaying
immediately.
PermitoptoutfromPROsforinteractivestreaming.TheOfficebelievesthat
musicpublishersshouldbeabletowithdrawspecificcategoriesoflicensing
rightsfromtheirauthorizationstothePROs.Atleastfornow,theOfficebelieves
thatwithdrawalofperformancerightsshouldbelimitedtodigitalrights
equivalenttothosethattherecordlabelsarefreetonegotiateoutsideofsections
112and114essentially,interactivestreamingrightsfordigitalservices.
Publishersthatchosetooptoutwouldberequiredtoprovidealistoftheir
U.S.CopyrightOffice
withdrawnworksandotherpertinentinformationtoacentralsource,suchasthe
generalmusicrightsorganization(GMRO)discussedbelow.Inaddition,the
Officebelievesthatsongwritersaffiliatedwiththatpublishershouldretainthe
optionofreceivingtheirwritersshareofroyaltiesdirectlythroughtheirchosen
licensingcollective.
Allowbundledlicensingofmechanicalandperformancerights.Industry
participantssupportincreasedbundlingofrightsi.e.,reproduction,
distribution,andperformancerightsinunifiedlicensestofacilitategreater
licensingefficiency.Althoughbundlingofsoundrecordingrightsoccursasa
matterofcourse,variouslegalrestrictionshavepreventedthatsame
developmentonthemusicalworkside.TheOfficebelievesthatthegovernment
shouldpursueappropriatechangestothelegalframeworktoencouragebundled
licensing,whichcouldeliminateredundantresourcesonthepartofboth
licensorsandlicensees.ThiscouldincludeallowingthePROsandotherentities
tobecomemusicrightsorganizations(MROs),whichwouldbeauthorizedto
licensebothperformanceandmechanicalrights.
Mechanical Licensing and Section 115
Studyparticipantshighlightedtheseriousshortcomingsofthe106yearoldcompulsory
licenseformechanicalreproductionsofmusicalworks(e.g.,CDs,vinylrecordsand
downloads)insection115.Onthecopyrightownerside,partiescomplainedthatthe
mandatorynatureofthelicensedoesnotpermitthemtocontroltheirworksorseek
higherroyalties.Onthelicenseeside,partiescriticizedsection115srequirementof
songbysonglicensing,adauntingtaskinaworldwhereonlineprovidersseeklicenses
formillionsofworks.Inlightoftheseconcerns,theOfficeoffersthefollowing
recommendations:
Permitcollectivelicensingofmechanicalrightsbutwithanoptoutrightfor
interactivestreaminganddownloaduses.TheOfficeissympathetictomusic
publishersargumentsforeliminationofthecompulsorylicenseinsection115in
favoroffreemarketnegotiations.Butinlightofthediffuseownershipof
musicalworks,itseemsclearthatsomesortofcollectivesystemwouldbe
necessaryeveninsection115sabsence.TheOfficethusbelievesthat,ratherthan
eliminatingsection115altogether,section115shouldinsteadbecomethebasisof
amoreflexiblecollectivelicensingsystemthatwillpresumptivelycoverall
mechanicalusesexcepttotheextentindividualmusicpublisherschoosetoopt
out.Atleastinitially,themechanicaloptoutrightwouldextendtointeractive
streamingrightsanddownloadingactivitiesuseswheresoundrecording
ownersoperateinthefreemarket(butnotphysicalgoods,whichhavesomewhat
distinctlicensingpractices).AsenvisionedbytheOffice,thecollectivesystem
wouldincludeMROs(asnoted,withtheabilitytorepresentbothperformance
andmechanicalrights),aGMRO(thatwouldcollectforworksorsharesnot
U.S.CopyrightOffice
representedbyanMROorcoveredbyadirectdeal),andindividualpublishers
thatchoosetooptout.Licenseescouldthusachieveendtoendcoverage
throughthecombinationofMROs,theGMRO,anddirectlicensors.
Establishblanketlicensingfordigitalusesundersection115.Tofurtherfacilitate
therightsclearanceprocessandeliminateuserconcernsaboutliabilityto
unknownrightsowners,theOfficebelievesthatmechanicallicensing,like
performancelicensing,shouldbeofferedonablanketbasisbythosethat
administerit.Thiswouldmeanthatalicenseewouldneedonlytofileasingle
noticewithanMROtoobtainarepertoirewideperformanceandmechanical
licensefromthatlicensingentity.Themovetoablanketsystemwouldallow
marketplaceentrantstolaunchtheirservicesandbeginpayingroyaltiesmore
quickly.
CRBratesettingonanasneededbasis.TheOfficebelievesthattheCRB
shouldcontinuetosetratesunderthesection115license,thoughwithan
importantmodification:asisnowthecasewithperformancerights,ratherthan
establishratesacrosstheboardeveryfiveyears,theCRBwouldsetratesfor
particularusesonlyonanasneededbasiswhenanMROandlicenseewere
unsuccessfulinreachingagreement.Otherinterestedparties(suchasother
MROsandotherusers)couldchoosetojointherelevantproceeding,inwhich
casethosepartieswouldbeboundbytheCRBdeterminedrate.
Ensurecopyrightownerspossessauditrights.Publishershavelongcomplained
aboutthelackofanauditrightundersection115.Inthatregard,section115is
anoutliersuchauditrightshavebeenrecognizedunderotherstatutory
licenses.TheOfficebelievesthatthemechanicallicensingsystemshouldbe
amendedtoprovideforanexpressauditright,withtheparticularlogisticstobe
implementedthroughregulation.
Maintainaudiovisualusesinthefreemarket.Recordcompaniesproposed
extendingcompulsoryblanketlicensingtocertainconsumeraudiovisual
productssuchasmusicvideos,albumcovervideos,andlyricvideosusesthat
havetraditionallyrequiredasynchronizationlicensenegotiatedinthefree
market.TheOfficeissympathetictothelabelsconcerns,butcannotatthistime
recommendthatconsumersynchusesbeincorporatedintoagovernment
supervisedlicensingregime.TheOfficedoesnotperceiveamarketfailurethat
justifiescreationofanewcompulsorylicense,andthemarketappearstobe
respondingtolicensingneedsforconsumeraudiovisualproducts.
Section 112 and 114 Licenses
Oneofthefewthingsthatseemstobeworkingreasonablywellinourlicensingsystem
isthestatutorylicenseregimeundersections112and114,whichpermitsqualifying
digitalservicestoengageinnoninteractivestreamingactivitiesataCRBdetermined(or
6
U.S.CopyrightOffice
otherwiseagreed)rate.Althoughthedifferingratesettingstandardsfortheselicenses
aswellassomeoftheratesestablishedunderthosestandardshavebeenasourceof
controversy,fromtherecordinthisstudy,thelicensingframeworkitselfisgenerally
wellregarded.Notwithstandingthecomparativelypositivereviewsofthesection112
and114licenses,thereareafewrelativelyminorimprovementsthattheOfficebelieves
shouldbeconsidered:
Considerratesettingdistinctionbetweencustomandnoncustomradio.In2009,
theSecondCircuitruledthatpersonalizedradioservicesareeligibleforthe
section112and114licenses.AlthoughtheOfficehassomereservationsabout
thatinterpretation,thereappearstobenooverwhelmingcalltoremovecustom
radiofromthestatutoryregime.Nonetheless,withinthatregime,itmaybe
appropriatetodistinguishbetweencustomandnoncustomradio,asthe
substitutionaleffectofpersonalizedradioonpotentiallycompetinginteractive
streamingservicesmaybegreaterthanthatofservicesofferingacompletely
noncustomizedexperience.Whiletheissuecouldbeaddressedlegislatively,this
doesnotappeartobenecessary,astheCRBhasthediscretiontosetdifferentrate
tierstodaywhentherecordsupportssuchanoutcome.
Allowfinetuningoftechnicalaspectsofthelicensethroughtheexerciseof
regulatoryauthority.Internetserviceshavecriticizedanumberofthedetailed
limitationsthatsection114imposesoncompulsorylicensees.Theseincludethe
socalledsoundrecordingperformancecomplement,arestrictionthatlimits
thefrequencywithwhichsongsfromthesamealbumorbythesameartistmay
beplayedbytheservice,aswellasaprohibitionagainstannouncingupcoming
selections.Butforthefactthattheyappearinthestatuteitself,suchdetails
wouldseemtobemoreappropriatelytheprovinceofregulation.Assuggested
moregenerallybelow,Congressmaywishtocommitnuancesliketheseto
administrativeoversightbytheCopyrightOffice.
ConsiderpermittingSoundExchangetoprocessrecordproducerpayments.
Recordproducerswhomakevaluablecreativecontributionstosound
recordingsarenotamongthepartiesentitledbystatutetodirectpaymentby
SoundExchange.Insomecases,anartistmayprovidealetterofdirection
requestingSoundExchangetopaytheproducersshareofincomefromtheartist
royaltiescollectedbySoundExchange,whichSoundExchangewillhonor.Ithas
beensuggestedthatthisinformalpracticeberecognizedthroughastatutory
amendment.Thoughitwouldbebeneficialtohearmorefromartistsonthis
issue,theOfficeagreesthatinmanyinstancesproducersareintegralcreators
andthattheproposalthereforemeritsconsideration.
AllowSoundExchangetoterminatenoncompliantlicensees.Unlikesection115,
sections112and114donotincludearighttoterminatealicenseethatfailsto
accountforandpayroyalties.TheOfficedoesnotseeajustificationfor
U.S.CopyrightOffice
continuedlicensingofauserthatisnotmeetingitsobligations,andagreesthat
thesection112and114statutorylicensesshouldbeamendedtoincludea
terminationprovisionakintothatinsection115.
Public Broadcaster Statutory License
Createaunifiedstatutorylicensingschemeforpublicbroadcasters.Public
broadcastersmustengageinamultitudeofnegotiationsandratesetting
proceedingsindifferentforatoclearrightsfortheirovertheairandonline
activities.Especiallyinlightoftherelativelylowroyaltyratespaidbypublic
broadcasters,Officesuggeststhattheratesettingprocessesapplicabletopublic
broadcastersbeconsolidatedwithinaunifiedlicensestructureundersection118
undertheauspicesoftheCRB,wheretheywouldlikelybemuchmoreefficiently
resolved.
D.
LicensingEfficiencyandTransparency
TheOfficebelievesthataccurate,comprehensive,andaccessibledata,andincreased
transparency,areessentialtoabetterfunctioningmusiclicensingsystem.Authoritative
datawouldbenefitallparticipantsinthemarketplaceforsoundrecordingsandmusical
works,andfacilitateamoreefficientsystem.Inaddition,itisessentialtomakereliable
usageandpaymentinformationavailabletorightsholders.Toachievethesetwingoals,
theOfficeoffersthefollowingrecommendations:
Establishincentivesthroughthestatutorylicensingschemeforexistingmarket
playerstocreateanauthoritativepublicdatabase.TheCopyrightOfficebelieves
thatanysolutiontothemusicdataproblemshouldnotbebuiltbythe
governmentbutshouldinsteadleverageexistingindustryresources.
Accordingly,theOfficerecommendsthatthegovernmentestablishincentives
throughthestatutorylicensingregimetoencourageprivateactorstocoordinate
theireffortsandcontributetoapubliclyaccessibleandauthoritativedatabase,
includingbyencouragingtheadoptionanddisseminationofuniversaldata
standards.Tofacilitatethisprocess,theCopyrightOfficeshouldprovide
regulatoryoversightregardingstandardsandgoals.
Establishtransparencyindirectdeals.Throughoutthestudy,aparamount
concernofsongwritersandrecordingartistshasbeentransparencyinthe
reportingandpaymentofwriterandartistsharesofroyalties,especiallyinthe
contextofdirectdealsnegotiatedbypublishersandlabelsoutsideofthePROs
andSoundExchange,whichmayinvolvesubstantialadvancesorequity
arrangements.Theseconcernsshouldbeaddressedaspartofanyupdated
licensingframework,especiallyonethatallowspublisherstooptoutofthe
statutorylicensingsystemandpursuedirectnegotiations.Inthecaseofdirect
dealsforrightscoveredbyanMROorSoundExchange,theOfficerecommends
U.S.CopyrightOffice
allowingsongwritersandartiststoelecttoreceivetheirsharesofroyaltiesfrom
thelicenseethroughtheirchosenlicensingentity.
E.
AnUpdatedMusicLicensingSystem
Toimplementtheprinciplesandrecommendationslaidoutabove,theCopyrightOffice
isproposinganupdatedframeworkforthelicensingofmusicalworks.Thebasic
componentsofthisproposalareasfollows:
MROs.UndertheOfficesproposal,excepttotheextenttheychosetooptoutof
theblanketstatutorysystem,publishersandsongwriterswouldlicensetheir
publicperformanceandmechanicalrightsthroughMROs.
o AnMROcouldbeanyentityrepresentingthemusicalworksof
publishersandsongwriterswithamarketshareinthemechanicaland/or
performancemarketaboveacertainminimumthreshold,forexample,
5%.Existingrightsorganizations,suchasASCAP,BMI,HFAandothers,
couldthusqualifyasMROs.
o EachMROwouldenjoyanantitrustexemptiontonegotiateperformance
andmechanicallicensescollectivelyonbehalfofitsmembersaswould
licenseegroupsnegotiatingwiththeMROswiththeCRBavailableto
establisharateincaseofadispute.ButMROscouldnotcoordinatewith
oneanotherandwouldbesubjecttoatleastroutineantitrustoversight.
o EachMROwouldberequiredtosupplyacompletelistofthepublishers,
works,percentagesharesandrightsitrepresented,aswellastheMROs
licensingcontactinformation,totheGMRO,andwouldbeobligatedto
keepthatinformationcurrent.MROswouldnothavetosharealloftheir
dataforpurposesofthepublicdatabase.Forexample,therewouldbeno
needforanMROtoprovidecontactinformationforitsmembers(other
thanthosethatoptedout)sincetheMROwouldberesponsiblefor
distributingroyaltiesunderthelicensesitissued.
o MROswouldalsoberesponsiblefornotifyingtheGMROofany
membersthathadexercisedoptoutrightsbyprovidingtherelevantopt
outinformation,includingwhereadirectlicensemightbesought,so
potentiallicenseeswouldknowwheretogoforlicenseauthority.
GMRO.EventhoughmostlicensingactivitywouldbecarriedoutbytheMROs
anddirectlylicensingpublishers,thehubofthenewlicensingstructurewould
bethegeneralMROorGMRO.TheGMROwouldhavecertainimportant
responsibilities:
o First,theGMROwouldberesponsibleformaintainingapublicly
accessibledatabaseofmusicalworksrepresentedbyeachMRO,which
9
U.S.CopyrightOffice
wouldincorporatedatasuppliedbytheMROsandotherauthoritative
sources.TheGMROwouldactivelygathermissingdata,reconcile
conflictingdata,andcorrectflaweddata,andwouldalsoprovidea
processtohandlecompetingownershipclaims.Inadditiontomusical
workdata,theGMROwouldalsoincorporatesoundrecordingdata
presumablyfromSoundExchangeintothepublicdatabase,andbe
responsiblefordevelopingadditionaldatathatmatchedsound
recordingswithmusicalworkstofacilitatemoreefficientlicensing.
o Second,theGMROwouldalsoserveasthedefaultlicensingand
collectionagentformusicalworks(orsharesofworks)thatlicensees
wereunabletoassociatewithanMROoroptoutpublisher.Services
withusagebasedpaymentobligationswouldtransmitrecordsofusefor
unmatchedworks,alongwithassociatedpaymentsandanadministrative
fee,totheGMRO.TheGMROwouldthenattempttoidentifytheMRO
orindividualcopyrightownersand,ifsuccessful,paytheroyaltiesout.If
unsuccessful,theGMROwouldaddtheusagerecordtoapublic
unclaimedroyaltieslistandholdthefundsforsomeperiodoftimee.g.,
threeyearstoseeifaclaimantcameforward.Asisthecasewith
SoundExchange,afterthatperiod,theGMROcoulduseanyremaining
unclaimedfundstohelpoffsetthecostsofitsoperations.
GMROfundingandresources.TheCopyrightOfficebelievesthatboth
copyrightownersandusersshouldprovidesupportfortheGMRO,asboth
groupswillbenefitfromitsactivities.UndertheOfficesproposal,everyMRO,
aswellasSoundExchange,wouldberequiredtocontributekeyelementsofdata
tocreateandmaintainacentralizedmusicdatabase.MROswouldbe
responsibleforallocatinganddistributingthevastmajorityofroyalties.In
exchangeforthesecontributionsonthepartofcopyrightowners,theOffice
believesthatmostdirectfinancialsupportfortheGMROshouldcomefromfees
chargedtousersofthesection112,114and115licenses.Thus,although
licenseeswouldbepayingroyaltiestoMROsandindividualpublishers
directlyandSoundExchangeaswelltheywouldhaveaseparateobligationto
payalicensingsurchargetotheGMRO.Thesurchargetobepaidbystatutory
licenseescouldbedeterminedbytheCRBbasedontheGMROscosts(and
withoutconsiderationofroyaltyrates)throughaseparateadministrative
process.Thesurchargewouldbeoffsetbyadministrativefeesandothersources
ofincomefortheGMRO,includinganyblackboxfundsunclaimedby
copyrightowners.
CopyrightRoyaltyBoardimprovements.UndertheCopyrightOfficesproposal,
ratesettingbytheCRBwouldshiftfromafiveyearcycletoasystemunder
whichtheCRBwouldstepinonlyasnecessarywhenanMROor
SoundExchangeandalicenseecouldnotagreeonarate.Thenewmodelwould
10
U.S.CopyrightOffice
createopportunitiesforcombinedratesettingproceedingsfornoninteractive
services(e.g.,internet,terrestrial,andsatelliteradio)encompassingbothsound
recordingsandmusicalworks.TheOfficerecommendsotherprocedural
adjustmentstotheCRBaswellincludingadjustmentstothestatutorily
prescribedlitigationprocessanditssettlementprocedures.Itwouldalsobe
worthwhiletoremoveunnecessaryproceduraldetailsinthestatutethatare
betterlefttoregulationbytheCRB.
Regulatoryimplementation.TheCopyrightOfficerecommendsthatifCongress
actstorestructurethemusiclicensingsystem,itwouldbemostproductivefor
thelegislationtosetouttheessentialelementsoftheupdatedsystembutleave
thedetailstobeimplementedthroughregulationbytheCopyrightOfficeand,in
ratesettingmatters,theCRB.Suchaconstructwouldlikelybemorerealisticto
enactthanahighlydetailedstatutoryprescriptionespeciallyinthecaseof
musiclicensing,wheretheparticularscanbeoverwhelming.
Furtherevaluation.ShouldCongresschoosetoembarkuponaseriesofchanges
tothelicensingsystemasdescribedabove,theOfficerecommendsthatthenew
systembeevaluatedbytheCopyrightOfficeafterithasbeeninoperationfora
periodofseveralyears.Assumingthenewlicensingframeworkincludesanopt
outmechanism,theefficacyofthatprocesswouldbeofparticularinterest.
Congresscouldchoosetonarroworexpandoptoutrightsasappropriate.
11
U.S.CopyrightOffice
I.
Introduction
TheUnitedStateshasthemostinnovativeandinfluentialmusiccultureintheworld,
butoursystemforenablingthepaiduseofmusicandensuringcompensationforits
creatorslagsfarbehind.Thestructuresthatevolvedinthepreviouscenturyto
facilitatethelawfulexploitationofmusicalworksandsoundrecordings,whileperhaps
adequatefortheeraofdiscsandtapes,areundersignificantstress.Fromacopyright
perspective,wearetryingtodeliverbitsandbytesthroughaVictrola.
Itisatestamenttotheirresistiblepowerofmusicthatindustryandmarketparticipants
havedonetheirbesttoadapttheoldmethods,includingpredigitalgovernment
policies,toembracecurrenttechnologiesandconsumerexpectations.Butthecostsof
failingtoupdateouroutmodedlicensingmethodsareescalating.Evenwhen
distributorsareperfectlywillingtopaylicensingfees,theymayfinditdifficultto
identifytheownersofthemusictheyuse.Thoseseekingtolaunchnewdelivery
platformsareconstrainedandsometimesevendefeatedbythecomplexitiesand
expenseofconvolutedclearanceprocesses.Perhapsmostconcerningisthatmany
deeplytalentedsongwritersanddevelopingartistsnowquestionwhetheracareerin
musicisrealisticunderthecurrentregime.
Asmightbeexpected,manyoftheissuesraisedbytheparticipantsinthisstudyofthe
musicmarketplacerevolvedaroundgovernmentmandates,inparticulartheroleofthe
antitrustconsentdecreesgoverningthelicensingofperformancerightsinmusicalworks
byperformingrightsorganizations(PROs),thesection115mechanicallicensefor
thereproductionanddistributionofmusicalworks,andthesection112and114licenses
forthedigitalperformanceofsoundrecordings.
Thereisaprofoundconvictiononthepartofmusicpublishersandsongwritersthat
governmentregulationoftheratesforthereproduction,distribution,andpublic
performanceofmusicalworkshassignificantlydepressedtheratesthatwould
otherwisebepaidforthoseusesinanunrestrictedmarketplace.Thestandards
employedforthesection115andPROratesettingproceedingssection801(b)(1)sfour
factortestformechanicalusesandthereasonablefeestandardoftheconsentdecrees
(whichcannottakeintoaccountsoundrecordingperformancerates)areperceivedas
producingbelowmarketrates,especiallywhencomparedtoratespaidforanalogous
usesofsoundrecordings.Ontheothersideofthefence,licenseesurgethatgovernment
oversightisessentialtoforestallallegedmonopolisticpracticesonthepartofthePROs
andlargemusicpublishers.
ThePROsareviewedasbothasablessingandathreat.Licenseeslaudtheefficiencies
oftheblanketlicensestheyofferwhileatthesametimebemoaningthesocieties
perceivedbargainingpositionasaresultofthatverybreadth.Songwriters,fortheir
part,aredeeplyconcernedaboutthepotentiallossoftransparencyinreportingand
12
U.S.CopyrightOffice
payment,shouldmajorpublishersopttowithdrawfromthePROsandlicense
performancerightsdirectlyassomepublishershavesuggestedtheymaydoinaquest
forhigherratesthanthosesetbytheratecourtsundertheconsentdecrees.
Withrespecttothesection112and114licensesfortheperformanceofsoundrecordings,
thedebatehascenteredonthedisparateratestandardsfordifferingclassesofdigital
usersthemoremalleable801(b)(1)standardthatisappliedtosatelliteradioversusthe
willingbuyer/willingsellerstandardforcompetingonlineradioservicesaswellasthe
overallburdenandexpenseoftheCRBratesettingprocess.Internetradioproviders
complainthattheCRBprocesshasyieldedratesthathaverequiredthemtoseek
congressionalintervention.
Therearedifferingopinionsastohowtohandlepre1972soundrecordings,whichare
currentlyoutsideoftheambitoffederalcopyrightlawbutprotectedinvaryingdegrees
underdifferingstateregimes.SomeconcurwiththeCopyrightOffices2011
recommendationthatpre1972recordingsshouldbebroughtfullywithinthescopeof
federalcopyrightprotection,butothersargueforamorelimitedfixornofixatall.
Meanwhile,sincetheinceptionofthestudy,threecourtshaveheldthatthepublic
performanceofpre1972recordingsissubjecttoprotectionunderapplicablestatelaw,
furthercomplicatingthelicensinglandscape.
Andlastbutnotleastisthelongstandingissueofwhetherterrestrialradiobroadcasters
shouldcontinuetobeexemptedundertheCopyrightActfrompayingroyaltiesforthe
performancesofsoundrecordingsthatdrivetheirmultibilliondollarindustryadebate
thathasbeensharpenedasonlineradioservicesseektocompetewiththeirterrestrial
counterparts.
Atthesametime,stakeholderswidelyacknowledgethatthereisaneedforuniversal
datastandardstofacilitatetheidentificationofmusicalworksandsoundrecordings,
andthelicensingprocessgenerally.Inparticular,thereisbroadrecognitionofthe
necessityforreliabledatatomatchsoundrecordingstothemusicalworkstheyembody.
Butthereisdiscordastohowtoaddresstheseproblems.Somemarketparticipantsare
willingtosharethedatatheyaccumulatewiththeworld,whileothersarereluctantto
doso.
Despitethewiderangeofviewpointsexpressedinthecourseofthisstudy,theOffices
reviewoftheissueshasconfirmedoneoverarchingpoint:thatourmusiclicensing
systemisinneedofrepair.Thequestion,then,ishowtofixit,inlightoftheoften
conflictingobjectivesoflongtimeindustryparticipantswithvestedinterestsin
traditionalbusinessmodelsandinfrastructure;digitaldistributorsthatdonotproduce
orownmusicandforwhichmusicrepresentsmerelyacostofdoingbusiness;
consumerswhoseappetiteformusicthroughvariedplatformsanddevicesonly
continuestogrow;andindividualcreatorswhoseverylivelihoodsareatstake.This
reportseekstochartapathforward.
13
U.S.CopyrightOffice
Giventheircomplexityandsignificance,manyoftheissuesaddressedbelowwould
themselvesbeworthyofaseparatereport.Butinsteadoffocusingoneachparticular
licensingprocessasanisolatedproblem,thegoalofthisstudyistoilluminatethe
systemasawholeincludinginterrelatedissuesandconcernstoseeiftheremaybea
balancedsetofchangesthatcouldprovidebenefitstoall.Ratherthanpresentadetailed
legislativeproposal,then,withalloftheintricacythatwouldentail,thereportinstead
suggestssomekeyprinciplesandmodificationsthattheCopyrightOfficebelieves
wouldbeusefulinframingabettersystem.
Theideasdescribedbelowarethusintendedtoserveasausefulframeworkfor
continuingdiscussionofhowwemightreinventourmusiclicensingsystem,ratherthan
afullydevelopedanswer.AsCongressconsidersarangeofpotentialamendmentsto
ourcopyrightlaws,theOfficehopesthatinterestedpartieswilltakeadvantageofthis
uniqueopportunitytoimproveourmusiclicensingprocessforthedigitalage.
A. Study History
InApril2013,Congress,ledbytheHouseJudiciaryCommittee,beganacomprehensive
reviewofthenationscopyrightlawstoevaluatewhetherthelawsarestillworkingin
thedigitalage.1Themyriadissuesaffectingthemusicindustryhavebeenasignificant
focusofthatreview.2
TheOfficeinitiatedthisstudytoilluminatecriticalconcernsofthemusicmarketplace
andtoidentifypotentialavenuesforchange.OnMarch17,2014,theOfficepublished
aninitialNoticeofInquiryintheFederalRegister(theFirstNotice)requestingpublic
commentontwentyfoursubjectsaffectingtheexistingmusiclicensingenvironment.3
PressRelease,H.Comm.ontheJudiciary,ChairmanGoodlatteAnnouncesComprehensive
ReviewofCopyrightLaws(Apr.24,2013),http://judiciary.house.gov/index.cfm/2013/4/
chairmangoodlatteannouncescomprehensivereviewofcopyrightlaw.
1
Oftheseventeenhearingsthathavebeenheldsofaraspartofthecongressionalreview,two
werespecificallydedicatedtomusiclicensing. Music Licensing Under Title 17 (Part I & II): Hearing
Before the Subcomm. on Courts, Intell. Prop., and the Internet of the H. Comm. on the Judiciary,113th
Cong.(2014) (Music Licensing Hearings).Musicindustryrepresentativesalsoparticipatedina
numberofotherhearings.See, e.g.,Moral Rights, Termination Rights, Resale Royalty, and Copyright
Term:Hearing Before the Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm. on the
Judiciary,113thCong.(2014); Section 512 of Title 17: Hearing Before the Subcomm. on Courts, Intell.
Prop. and the Internet of the H. Comm. on the Judiciary,113thCong.(2014);The Scope of Fair Use:
Hearing Before the Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm. on the Judiciary,
113thCong.(2014).
MusicLicensingStudy:NoticeandRequestforPublicComment,78Fed.Reg.14,739(Mar.17,
2014).ThisNoticeofInquiry,alongwiththeOfficessecondNoticeofInquiryandNoticeof
PublicRoundtables,areattachedasAppendixA.Alistofthepartieswhorespondedtothe
14
U.S.CopyrightOffice
TheOfficereceived84writtencommentsinresponsetoitsnotice,spanningabroad
spectrumofinterestedparties,includingmusicindustryassociations,serviceproviders
andtechnologycompanies,legalscholars,publicinterestgroups,andindividualartists
andcreators.4
InJune2014,theOfficeconductedthreetwodaypublicroundtablesinNashville,Los
Angeles,andNewYorkCity.5Theroundtablesprovidedparticipantswiththe
opportunitytosharetheirviewsonthetopicsidentifiedintheFirstNoticeandother
issuespertainingtoourmusiclicensingsystemandhowitmightbeimproved.
Inaddition,onJuly23,2014,theOfficepublishedasecondNoticeofInquiry(Second
Notice)requestingfurthercommentsonanumberofsignificantissuesraisedinearlier
commentsanddiscussedattheroundtables.6TheOfficereceived51substantivewritten
commentsinresponsetotheSecondNotice,againrepresentingawidevarietyof
viewpoints,onthesesubjects.7
B. Licensing and Ratesetting Charts

TheOfficehaspreparedaseriesofchartstoillustrateourcurrentsystemsforlicensing
ofmusicalworksandsoundrecordingsandtheratesettingproceduresundertheseveral
statutorylicenses,aswellashowthoseprocesseswouldbealteredasaresultofthe
modificationsproposedbytheOffice.Theseappearatthebackofthestudyin
AppendixD.TheOfficehopesthatthesechartswillprovehelpfultoreadersasthey
maketheirwaythroughthisreport.
OfficesNoticesofInquiry,alongwithalistofparticipantsintheOfficespublicroundtables,is
attachedasAppendixB.
ThecommentsreceivedinresponsetotheFirstNoticeareavailableontheCopyrightOffice
websiteathttp://copyright.gov/docs/musiclicensingstudy/comments/Docket2014_3/index.html.
Referencestothesecommentsinthisdocumentarebypartyname(abbreviatedwhere
appropriate)followedbyFirstNoticeComments(e.g.,DiMAFirstNoticeComments).
SeeMusicLicensingStudy,79Fed.Reg.25,626(May5,2014).Transcriptsoftheproceedingsat
eachofthethreeroundtablesareavailableontheCopyrightOfficewebsiteathttp://copyright.
gov/docs/musiclicensingstudy/transcripts/.
MusicLicensingStudy:SecondRequestforComments,79Fed.Reg.42,833(July23,2014).
ThecommentsreceivedinresponsetotheSecondNoticeareavailableontheCopyrightOffice
websiteathttp://copyright.gov/docs/musiclicensingstudy/comments/Docket2014_3/
extension_comments/.Referencestothesecommentsinthisdocumentarebypartyname
(abbreviatedwhereappropriate)followedbySecondNoticeComments(e.g.,RIAASecond
NoticeComments).
7
15
U.S.CopyrightOffice
II.
Music Licensing Landscape
Ourrulesformusiclicensingarecomplexanddauntingevenforthosefamiliarwiththe
terrain.Tobeginwith,ourlicensingstructuresmustaddresstwodifferentspeciesof
copyrightthesoundrecordingandthemusicalworkresidinginasingleproduct.
Eachoftheseseparatecopyrights,inturn,itselfrepresentsseveraldifferentexclusive
rightsthatmaybeseparatelylicensed,includingtherightsofreproduction,distribution,
publicperformance,aswellastherighttosynchronizeworkswithvisualcontent.
Thesituationisfurthercomplicatedbythefactthatmanylicensingtransactionsare
regulatedbythegovernment.Butthegovernmentruleshavenotbeenimplementedin
aunifiedorsystematicfashion.Instead,theyrepresentaseriesofstatutoryandjudicial
mandatesthatcameintoeffectatvariouspointsduringthelastcenturytoaddress
particularconcernsoftheday.Andstillmorechallengingisthatnotalllicensingis
conductedaccordingtothesegovernmentmandatedprotocols.Somelicensingis
permittedtotranspireintheprivatemarketplacewithoutgovernmentoversight.In
addition,therearevoluntaryworkaroundstothegovernmentprocessesmoreefficient
alternativesthathavegrownupliketreesaroundthegovernmentrulesandarenow
deeplyrooted.
Thissectionprovidesanintroductiontoourmusiclicensingsystemandthosewho
participateinit.8Beforeturningtothechallengeswefaceandhowtheymightbe
addressed,itisimportanttounderstandwhereweareandhowwegothere.
A. Copyright Overview
1. Brief History of Copyright Protection for Music
Congresspassedthefirstfederalcopyrightactin1790.9Thatactdidnotprovideexpress
protectionformusicalcompositions(ormusicalworksintheparlanceofthecurrent
CopyrightAct),thoughsuchworkscouldberegisteredasbooks.10Then,in1831,
Congressamendedthelawtoprovideexpresslythatmusicalworksweresubjectto
federalcopyrightprotection.11
Asnotedabove,theOfficehasincludedchartsinAppendixDofthisreportthatprovidea
birdseyeviewofthelicensingandratesettingsystemsformusic.Thechartsareintendedas
highlevelreferencesanddonotcaptureeverynuanceorquirkofthesystem.Alistof
abbreviationsusedinthereportisincludedasAppendixC.
8
ActofMay31,1790,ch.15,1Stat.124.
SeeClayton v. Stone,5F.Cas.999,1000(C.C.S.D.N.Y.1829)(No.2872);I.TrotterHardy,
Copyright and New Use Technologies,23NOVAL.REV.659,664(1999).
10
ActofFeb.3,1831,ch.16,4Stat.436.
11
16
U.S.CopyrightOffice
The1831amendment,however,providedownersofmusicalworkswithonlythe
exclusiverighttoreproduceanddistributetheircompositions,i.e.,toprintandsellsheet
music,because,[a]tthetime,performanceswereconsideredthevehiclebywhichto
spurthesaleofsheetmusic.12In1897,Congressexpandedtherightsofmusicowners
toincludetheexclusiverighttopubliclyperformtheirworks.13Withthe1909Copyright
Act,federalcopyrightprotectionformusicalworkswasfurtherextendedbyaddingan
exclusiverighttomakemechanicalreproductionsofsongsinphonorecordsin
thosedays,pianorolls,butinthemodernera,vinylrecordsandCDs.Atthesametime,
Congresslimitedthenewphonorecordrightbyenactingacompulsorylicenseforthis
use,atopicthatisaddressedingreaterdepthbelow.14Andin1995,Congressconfirmed
thatanownersexclusiverighttoreproduceanddistributephonorecordsofmusical
worksextendstodigitalphonorecorddeliveries(DPDs)thatis,thetransmissionof
digitalfilesembodyingmusicalworks.15
Overtime,newtechnologieschangedthewaypeopleconsumedmusic,frombuying
andplayingsheetmusic,toenjoyingplayerpianos,tolisteningtosoundrecordingsona
phonographorstereosystem.16Butitwasnotuntil1971,severaldecadesafterthe
widespreadintroductionofphonorecords,thatCongressrecognizedartistssound
recordingsasadistinctclassofcopyrightedworksthatwerethemselvesdeservingof
federalcopyrightprotection.17Thisfederalprotection,however,waslimitedtosound
recordingsfixedonorafterFebruary15,1972,and,untilmorerecently,protectedonly
theexclusiverightsofreproduction,distribution,andpreparationofderivativeworks.
Noexclusiverightofpublicperformancewasgranted.18Then,in1995,Congress
grantedsoundrecordingownersalimitedpublicperformancerightfordigitalaudio
SeeMariaA.Pallante,ASCAP at 100,61J.COPYRIGHT SOCY545,54546(2014).
12
ActofMar.3,1897,ch.392,29Stat.694;see alsoZviS.Rosen,The Twilight of the Opera Pirates: A

Prehistory of the Exclusive Right of Public Performance for Musical Compositions,24CARDOZOARTS&
ENT.L.J.1157,115859(2007).
13
Thisreportusesboththetermcompulsoryandthetermstatutorywhendescribingthe
section112,114,and115licenses.
14
DigitalPerformanceRightinSoundRecordingsActof1995(DPRSRA),Pub.L.No.10439,
4,109Stat.336,34448;see also17U.S.C.115(c)(3)(A).
15
See U.S.COPYRIGHTOFFICE,FEDERALCOPYRIGHTPROTECTIONFORPRE1972SOUNDRECORDINGS
7,11(2011)(PRE1972SOUNDRECORDINGSREPORT);MichaelErlinger,Jr.,An Analog Solution in a
Digital World: Providing Federal Copyright Protection for Pre1972 Sound Recordings,16UCLAENT.L.
REV.45,5758(2009).
16
Pub.L.No.92140,85Stat.391(1971)(SoundRecordingActof1971);see generally PRE1972

SOUNDRECORDINGSREPORTat712.
17
See PRE1972SOUNDRECORDINGSREPORTat1214.
18
17
U.S.CopyrightOffice
transmissionsthough,asdiscussedbelow,thatrightwasmadesubjecttocompulsory
licensingundersections112and114oftheCopyrightAct.19
2. Musical Works Versus Sound Recordings

Astheabovehistoryindicates,amusicalrecordingencompassestwodistinctworksof
authorship:themusicalwork,whichistheunderlyingcompositioncreatedbythe
songwriterorcomposeralongwithanyaccompanyinglyrics,andthesoundrecording,
whichistheparticularperformanceofthemusicalworkthathasbeenfixedina
recordingmediumsuchasCDordigitalfile.Becauseofthisoverlap,musicalworksand
soundrecordingsarefrequentlyconfused.Itisimportanttokeepinmind,however,
thattheseareseparatelycopyrightableworks.
Amusicalworkcanbeintheformofsheetmusic,i.e.,notesandlyricswrittenonapage,
orembodiedinaphonorecord,i.e., inarecordingofthesong.20Asoundrecording
comprisesthefixedsoundsthatmakeuptherecording.Themusicalworkandsound
recordingareseparatelyprotected,andcanbeseparatelyowned,undercopyrightlaw.
3. Key Players in the Music Marketplace

Musicalworksandsoundrecordingscanbeandoftenarecreated,owned,and
managedbydifferententities.
a. Songwriters
Theauthorsofamusicalworkarecomposers,lyricistsand/orsongwriters.21A
songwritermaycontributemusic,lyrics,orboth.
DPRSRA2,3.Thedigitalperformancerightisalsosubjecttoanumberofexceptions,
includingfortransmissionstoorwithinabusinessforuseintheordinarycourseofitsbusiness,
fornonsubscriptionbroadcasttransmissions,andforcertaingeographicallylimited
retransmissionsofnonsubscriptionbroadcasttransmissions.17U.S.C.114(d)(1)(A),(B),(C)(ii),
(C)(iv).
19
TheCopyrightActsometimesdrawsadistinctionbetweendramaticmusicalworksthatis,
musicalworksthatarepartofadramaticshowsuchasanopera,ballet,ormusicaland
nondramaticmusicalworks.Forexample,thecompulsorylicenseundersection115forthe
makinganddistributingofphonorecordsappliesonlytonondramaticworks.See17U.S.C.
115.Inpractice,however,thedistinctiondrawninsection115doesnotappearespecially
consequentialexceptwhenalicenseeisseekingtousetheworkinthecontextofthedramatic
production;forinstance,ashowtunethatisrecordedforreleaseasanindividualsongis
understoodtobelicensableundersection115.
20
Foreaseofreference,thisreportwillcollectivelyrefertothesecreatorsofmusicalworksas
songwriters.
21
18
U.S.CopyrightOffice
TheSongwritersGuildofAmerica(SGA)andNashvilleSongwritersAssociation
International(NSAI)arewellknowntradeorganizationsthatrepresentthegeneral
interestsofsongwriters.Anothergroup,theSocietyofComposersandLyricists
(SCL),representstheinterestsofsongwritersworkingspecificallyinthemotion
pictureandtelevisionindustries.
b. Music Publishers
Songwritersoftenenterintopublishingagreementswithmusicpublishers.Undersuch
anarrangement,thepublishermaypayanadvancetothesongwriteragainstfuture
royaltycollectionstohelpfinancethesongwriterswritingefforts.Inaddition,the
publisherpromotesandlicensesthesongwritersworksandcollectsroyaltiesonthe
songwritersbehalf.Inexchange,thesongwriterassignsaportionofthecopyrightin
thecompositionsheorshewritesduringthedealtermtothepublishertraditionally
50%,butsometimeslessandthepublisheriscompensatedbyreceivingaroyalty
share.22Insomecases,amusicalworkhasasinglesongwriterandasinglepublisher,
anddividingroyaltiesisrelativelystraightforward.Butmanysongshavemultiple
songwriters,eachwithhisorherownpublisherandpublishingdeal.Insuchcases,it
maybechallengingtodetermineroyaltysharesorsplitsamongthevarious
parties.23
ThethreemajormusicpublishersSony/ATVMusicPublishing(Sony/ATV),
Warner/ChappellMusic,andUniversalMusicPublishingGroup(UMPG)together
controlover60%ofthemusicpublishingmarket.24Therearealsoahandfulofmid
sizedmusicpublishers,suchasKobaltMusicGroupandBMGChrysalis,andthousands
ofsmallermusicpublishers,amongthemselfpublishedsongwriters.TheNational
MusicPublishersAssociation(NMPA)andtheAssociationofIndependentMusic
Publishers(AIMP)aretwomajortradeorganizationsrepresentingtheinterestsof
musicpublishers.25Anothergroup,InterestedPartiesAdvancingCopyright(IPAC),
wasestablishedinNashvillein2014andincludesindependentpublishers,
administrators,businessmanagers,andentertainmentattorneys.26
DONALDS.P ASSMAN, ALLYOUNEED TOKNOW ABOUTTHEM USICBUSINESS220(8thed.2013)

(PASSMAN).
22
See generallyALKOHN &BOBKOHN, KOHNONM USICLICENSING 32944(4thed.2010)

(KOHN).
23
See EdChristman,FirstQuarter Music Publishing Rankings: SONGS Surges Again,BILLBOARD
(May12,2014),http://www.billboard.com/biz/articles/news/publishing/6084783/firstquarter
musicpublishingrankingssongssurgesagain.
24
25
NMPA&HFAFirstNoticeCommentsat1.
NateRau,New Nashville Group to Push for Copyright Reform,THETENNESSEAN(May25,2014),

http://www.tennessean.com/story/money/industries/music/2014/05/25/nashvillecopyright
groupemerges/9513731.
26
19
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c. Performing Rights Organizations (PROs)

SongwritersandpublishersalmostalwaysassociatethemselveswithaPRO,whichis
responsibleforlicensingtheirpublicperformancerights.ThetwolargestPROsthe
AmericanSocietyofComposers,AuthorsandPublishers(ASCAP)andBroadcast
Music,Inc.(BMI)togetherrepresentaroundover90%ofthesongsavailablefor
licensingintheUnitedStates.27ASCAPandBMIoperateonanotforprofitbasisand,
asdiscussedbelow,aresubjecttoantitrustconsentdecreesthatimposeconstraintson
theirmembershipandlicensingpractices.InASCAPscase,thisincludesanexpress
prohibitiononlicensinganyrightsotherthanpublicperformancerights.
InadditiontotheselargerPROs,therearetwoconsiderablysmaller,forprofitPROs
thatlicenseperformancerightsoutsideofdirectgovernmentoversight.Nashvillebased
SESAC,Inc.wasfoundedinthe1930s.28SESACsmarketshareoftheperformance
rightsmarketisunclear,butappearstobeatleast5%andpossiblyhigher.29Global
MusicRights(GMR),anewcomertothesceneestablishedin2013,handles
performancerightslicensingforaselectgroupofsongwriters.30WhileASCAPand
BMIsconsentdecreesprohibitthemfromexcludingpotentialmemberswhoareableto
meetfairlyminimalcriteria,31SESACandGMRhavenosuchrestrictionandaddnew
membersbyinvitationonly.32
SeeBenSisario,Pandora Suit May Upend CenturyOld Royalty Plan,N.Y.TIMES(Feb.13,2014),
http://www.nytimes.com/2014/02/14/business/media/pandorasuitmayupendcenturyold
royaltyplan.html.
27
About Us,SESAC,http://www.sesac.com/about/about.aspx(lastvisitedJan.26,2014).
28
SeeChrisVersace,The Future of Streaming Music Rests With Congress,FOXBUSINESS(June23,
2014),http://www.foxbusiness.com/technology/2014/06/23/futurestreamingmusicrestswith
congress(SESACcontrolsapproximately5%ofthemarket);In re Pandora Media, Inc. (Pandora
Ratesetting),6F.Supp.3d317,351&n.55(S.D.N.Y.2014)(notingthatduringlicensenegotiations
SESAChaduseda10%figuretodescribeitsmarketshare,butthattheactualfigureis
impossibletoknowwithcertainty).
29
SeeGMR,http://www.globalmusicrights.com(lastvisitedJan.30,2015);see alsoEdChristman,
GailMitchell,andAndrewHampp,Pharrell to Leave ASCAP for Irving and Grimmets Global Music
Rights,BILLBOARD(July25,2014),www.billboard.com/articles/business/6188942/pharrellto
leaveascapforirvingandgrimmetsglobalmusicrights;BenSisario,New Venture Seeks Higher
Royalties for Songwriters,N.Y.TIMES(Oct.29,2014),http://www.nytimes.com/2014/10/30/
business/media/newventureseekshigherroyaltiesforsongwriters.html.
30
ASCAPmustadmitanyonewhohaspublishedasinglemusicalworkorisactivelyengagedin
themusicpublishingbusiness;BMIsimilarlyacceptsanyonewhohaswrittenatleastone
musicalworkthatislikelytobeperformedsoon.See United States v. ASCAP,No.411395,2001
WL1589999,200102TradeCas.(CCH)73,474,XI(S.D.N.Y.June11,2001)(ASCAPConsent
Decree);United States v. BMI, No.64civ3787,1966U.S.Dist.LEXIS10449, 1966TradeCas.
(CCH)71,941,V(S.D.N.Y.1966),as amended by,1994U.S.Dist.LEXIS21476, 19961TradeCas.
31
20
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d. Mechanical Rights Administrators

Asexaminedinmoredepthbelow,therighttomakeanddistributephonorecordsof
musicalworksi.e.,themechanicalrightissubjecttocompulsorylicensingunder
section115oftheAct.Butinpractice,becauseoftheadministrativeburdensimposed
bythelicenseincludingserviceofanoticeonthecopyrightownerandmonthly
reportingofroyaltiesonasongbysongbasismechanicallicensingisoftenhandled
viathirdpartyadministrators.33TheoldestandlargestsuchorganizationistheHarry
FoxAgency,Inc.(HFA),whichwasestablishedbytheNMPAin1927andtoday
representsover48,000publishersinlicensingandcollectionactivities.34Mechanical
licensesissuedbyHFAincorporatethetermsofsection115,butwithcertainvariations
fromthestatutoryprovisions.35Anotherentitythatassistswithmechanicallicensingis
MusicReports,Inc.(MRI),whichpreparesandservesstatutorynoticesonbehalfofits
clientsandadministersmonthlyroyaltypaymentsinkeepingwiththerequirementsof
section115.36Mechanicallicensesarealsoissuedandadministereddirectlybymusic
publishersinmanyinstances.
e. Recording Artists and Producers

Thecreatorsofsoundrecordingstypicallyincluderecordingartiststhatis,thesinger
ormembersofthebandwhoarefeaturedintherecording.Therecordingprocessis
oftenmanagedbyaproducer,whosupervisesandcontributesoverallartisticvisionto
theproject.Othernonfeaturedmusiciansandvocalistsmayaddtheirtalentstothe
recordingaswell.Exceptwithrespecttodigitalperformancerightsfallingunderthe
section114statutorylicense,37featuredartistsaretypicallypaidundertheirrecord
companycontracts,whilenonfeaturedperformersareusuallycompensatedatanhourly
(CCH)71,378(S.D.N.Y.1994).ThemostreadableversionofthecurrentBMIconsentdecreeis
theversionprovidedontheDepartmentofJustices(DOJs)website,andistheversioncited
throughoutthisreport.See United States v. BMI,No.64civ3787(S.D.N.Y.Nov.18,1994)(final
judgment)(BMIConsentDecree),available athttp://www.justice.gov/atr/cases/
f307400/307413.pdf.
Radio Music License Comm., Inc. v. SESAC,29F.Supp.3d487,498(E.D.Pa.2014);Pandora
Ratesetting,6F.Supp.3dat351;GMR,http://www.globalmusicrights.com(lastvisitedJan.30,
2015).
32
33
KOHNat77172,80810.
34
HARRY FOXAGENCY,http://www.harryfox.com(lastvisitedJan.9,2015).
KOHNat803806.Forexample,HFAlicensesallowlicenseestoaccountforroyaltiesona
quarterlybasis,asopposedtothemonthlyreportingrequiredundersection115.Become an HFA
Licensee, HARRYFOX AGENCY,http://www.harryfox.com/license_music/become_hfa_
licensee.html(lastvisitedJan.25,2015).
35
See MRIFirstNoticeCommentsat13.
36
See17U.S.C.114(g)(dividingstatutoryroyaltyproceedsamongthesegroups).
37
21
U.S.CopyrightOffice
ratebasedontheirworkonspecificprojects.38Producersmaybepaidaflatfeefortheir
effortsand/ormaybepaidaroyaltysharebythefeaturedartistoutoftheartists
earnings.39
TheorganizationSoundExchangecollectsandpaysroyaltiestofeaturedand
nonfeaturedartists(aswellastorecordcompanies)fornoninteractivestreaminguses
underthesection112and114statutorylicenses,andadvocatesfortheirinterestsin
relationtothoseuses.40TheRecordingAcademy,alsoknownastheNationalAcademy
ofRecordingArtsandSciences(NARAS)theorganizationresponsibleforthe
GRAMMYawardsrepresentsmusicians,producers,recordingengineers,andother
recordingprofessionalsonawiderangeofindustrymatters.41TheFutureofMusic
Coalition(FMC)advocatesonbehalfofindividualmusiccreators.42TheAmerican
FederationofMusiciansoftheUnitedStatesandCanada(AFM)andScreenActors
GuildAmericanFederationofTelevisionandRadioArtists(SAGAFTRA)arelabor
unionsthatrepresenttheinterestsofnonfeaturedmusiciansandvocalists.43
f. Record Companies
Mostcommerciallysuccessfulsoundrecordingsaretheproductofcontractual
relationshipsbetweenrecordingartistsandrecordlabels.44Thoughlevelsof
responsibilityvaryaccordingtothespecificsofindividualrecordingcontracts,arecord
labelsusualroleistofinancetheproductionofsoundrecordings,promotethe
recordings(andsometimestherecordingartiststhemselves),andarrangetodistribute
therecordingsviaphysicalanddigitaldistributionchannels.45Exceptinthecaseof
noninteractivestreamingusesthatqualifyforthesection112and114licenses,record
labelstypicallyhandlethelicensingforthesoundrecordingstheyown.
SeeSound Recordings at a Glance,SAGAFTRA,http://www.sagaftra.org/files/sag/

documents/soundrecordings_ataglance_2014.pdf(lastvisitedJan.25,2014).
38
SeeDanDaley,Points of Survival: Producers Adapt to a New Economic Landscape in the Music
Industry,GRAMMY.COM(Sept.1,2010),http://www.grammy.com/news/pointsofsurvival;
NARASFirstNoticeCommentsat56.
39
Unlikeroyaltiespaidundersection114,royaltiesunderthe112licensearenotdistributed
directlytofeaturedandnonfeaturedartists,butinsteadarepaidtothesoundrecordingowner.
See17U.S.C.114(g)(2);see also17U.S.C.112(e).
40
41
About Us,FUTUREOF M USICCOALITION ,https://www.futureofmusic.org/about(lastvisitedJan.
25,2015).
42
SAGAFTRA&AFMFirstNoticeCommentsat12.
43
KOHNat1454.
44
PASSMANat63.Labelsmayalsosecuremechanicalrightstomusicalworksembodiedinsound
recordings.
45
22
U.S.CopyrightOffice
Inmodernindustryparlance,therearetwoclassesofrecordlabels:majorlabelsand
independentlabels.46Therearecurrentlythreemajorrecordlabels:UniversalMusic
Group(UMG),SonyMusicEntertainment,Inc.(SME),andWarnerMusicGroup
(WMG).47Independentlabelsareentitiesthatarenotwhollyownedbyoneofthe
threemajorrecordlabels.IntheUnitedStates,therearecurrentlyhundredsof
independentlabels,whichaccountforroughly35%ofdomesticrecordingindustry
revenues.48
Onenotablefeatureofthemodernmusicmarketplaceistheextentofcommoncorporate
ownershipofmajorrecordlabelsandmajormusicpublishers:UMPGisownedbyUMG
(whichinturnisownedbyFrenchmediaconglomerateVivendi);theSonyCorporation
ownsSMEandhalfofSony/ATV;andWarner/ChappellMusicisadivisionofWMG.49
TheRecordingIndustryAssociationofAmerica(RIAA)andtheAmericanAssociation
ofIndependentMusic(A2IM)arethetwoprimarytradeorganizationsrepresenting
theinterestsofrecordlabels.TheInternationalFederationofthePhonographicIndustry
(IFPI)representsrecordlabelsglobally.50Asnotedabove,SoundExchangeoriginally
adivisionoftheRIAAandlaterspunoffasanindependententity51representsthe
interestsoftherecordlabelsinrelationtothesection112and114licenses.
g. Music Providers
Thereareanumberoforganizationsthatrepresenttheinterestsofthethousandsof
musicbroadcastersanddistributorsincludingradioandtelevisionstations,digital
musiccompanies,andphysicalandonlinerecordstores.
A2IM,theU.S.tradeassociationthatrepresentstheinterestsofindependentrecordlabels,
objectstothetermmajorlabel.AccordingtoA2IM,independentlabels,collectively,represent
34.6%oftheU.S.musicmarket,makingthemthelargestmusiclabelindustrysegment.A2IM
FirstNoticeCommentsat1,3.
46
Thethreemajorlabelsallownandoperatesmallerlabels.ForexampleAtlanticRecordsand
RhinoEntertainmentCompanyarebothownedbyWMG.
47
48
A2IMFirstNoticeCommentsat1,3.
SebastianTorrelio,Jody Gerson Appointed Chairman and CEO of Universal Music Publishing Group,
VARIETY(Aug.1,2014),http://variety.com/2014/biz/news/jodygersonappointedchairmanand
ceoofuniversalmusicpublishinggroup1201273829;Profile: Sony Corp,REUTERS,http://www.
reuters.com/finance/stocks/companyProfile?symbol=SNE.N;About Us,WARNER/CHAPPELL
MUSIC,http://www.warnerchappell.com/about(lastvisitedJan.25,2015).
49
IFPI,http://www.ifpi.org(lastvisitedJan.15,2015).
50
GlennPeoples,SoundExchange Distributes Record $153 Million in Q3, Celebrates 10Year
Anniversary,BILLBOARD(Oct.4,2014),http://www.billboard.com/biz/articles/news/5748060/
soundexchangedistributesrecord153millioninq3celebrates10year.
51
23
U.S.CopyrightOffice
TheNationalAssociationofBroadcasters(NAB)isthemaintradeorganization
representingterrestrial(AM/FM)radioandtelevisionbroadcasters.52Broadcastershave
alsoestablishedanumberofmusiclicensecommitteesthatcollectivelynegotiate
licensingarrangementswiththePROs.TheseincludetheRadioMusicLicense
Committee(RMLC),53theTelevisionMusicLicenseCommittee(TMLC),54the
NationalReligiousBroadcastersMusicLicenseCommittee(NRBMLC)andthe
NationalReligiousBroadcastersNoncommercialMusicLicenseCommittee
(NRBNMLC).55NationalPublicRadio(NPR)operatesandadvocatesonbehalfof
publicradiostations.
TheDigitalMediaAssociation(DiMA)isanationaltradeorganizationthatadvocates
fordigitalmusicandmediacompanies,suchasPandora,Rhapsody,Apple,and
YouTube.56
CTIATheWirelessAssociation(CTIA)57representsthewirelesscommunications
industry,andtheComputerandCommunicationsIndustryAssociation(CCIA)
representsabroadrangeoftechnologycompanies.58
MusicBusinessAssociation(MusicBiz),formerlytheNationalAssociationof
RecordingMerchandisers,includesmanyphysicalanddigitaldistributorsofmusicinits
membership.59
h. Consumers
Lastbutnotleast,therearemusicfans.Asdigitaltechnologiescontinuetoevolve,
individualusersinteractwithmusicmoreandmoreinwaysthatimplicatecopyright
theycopyit,shareit,andremixitwithothercontent.
NABFirstNoticeCommentsat1.
52
RMLCFirstNoticeCommentsat1.
53
TMLCFirstNoticeCommentsat1.
54
NRBMLCFirstNoticeCommentsat23;NRBNMLCFirstNoticeCommentsat12.The
NationalCable&TelecommunicationsAssociation(NCTA),whichrepresentscableoperators,
hasitsownmusiclicensecommitteetonegotiatePROlicensesforpublicperformancesofmusic
incableoperatorslocalprogramming.SeeNCTA,CommentsSubmittedinResponsetothe
DOJsAntitrustConsentDecreeReviewat1(Aug.6,2014),available athttp://www.justice.gov/atr/
cases/ascapbmi/comments/307982.pdf.
55
56
DiMAFirstNoticeCommentsat1.
57
CTIAFirstNoticeCommentsat24.
58
CCIASecondNoticeCommentsat1.
59
About,MUSICBUSINESSASSOCIATION,http://musicbiz.org/about(lastvisitedJan.25,2015).
24
U.S.CopyrightOffice
Anumberofgroupsrepresenttheinterestsofmusicconsumersinpolicymatters,
includingPublicKnowledgeandtheConsumerFederationofAmerica(CFA).60
B. Licensing Musical Works

1. Exclusive Rights in Musical Works
TheownerofamusicalworkpossessesexclusiverightsundertheCopyrightAct,
includingtherighttoauthorizeotherstoexploitthefollowingexclusiverights:theright
tomakeanddistributecopies(e.g.,sheetmusic)orphonorecords(e.g.,CDsanddigital
audiofiles)ofthework(thesocalledmechanicalright);61therighttocreatederivative
works(e.g.,anewworkbasedonanexistingcomposition);62therighttodisplaythe
workpublicly(e.g.,bypostinglyricsonawebsite);63andtherighttoperformthework
publicly(e.g.,inalivevenueorbroadcast).64Althoughitisnotspecifiedinsection106of
theAct,asamatterofbusinesspractice,themusicindustryalsorecognizestherightto
synchronizemusicalworkstovisualcontent(e.g., inamusicvideo).The
synchronization(orsynchright)isaspeciesofthereproductionrightandmayalso
implicatethederivativeworkright.65
Themusicindustryreliesondifferententitiestolicenseandadministerrightsinmusical
works,principallybecauseofavarietyoflegalrestrictionsandindustrypracticesthat
havegrownupovertime.Thisbalkanizedlicensingschemewasnotoverlyproblematic
duringtheanalogage,whendeterminingtheboundariesbetweenrightswasrelatively
straightforward.Inpredigitaldays,radioandrecorddistributorsrepresenteddistinct
commercialchannelswithdifferentlicensingneeds.Today,however,digitalproviders
oftenmergetheseroles.Asaresult,thedemarcationsbetweentraditionallicensing
categoriesarenolongerasclearespeciallywithrespecttotherelationbetween
reproductionanddistributionrights,ontheonehand,andpublicperformance,onthe
other.Thecurrentcomplexityofthemusiclicensingmarketplaceisattributableatleast
inparttotheblurringofthetraditionallinesofexploitation.
CFA&PublicKnowledgeFirstNoticeCommentsat1;About Us,PUBLICKNOWLEDGE,
https://www.publicknowledge.org/aboutus(lastvisitedJan.25,2015).
60
61
17U.S.C.106(1),(3).
17U.S.C.106(2).
62
17U.S.C.106(5).
63
17U.S.C.106(4).
64
See Buffalo Broad. Co., Inc., v. ASCAP,744F.2d917,920(2dCir.1984)(Thesynchrightisa
formofthereproductionrightalsocreatedbystatuteasoneoftheexclusiverightsenjoyedbythe
copyrightowner.(citing17U.S.C.106(1)));Agee v. Paramount Commcns, Inc.,59F.3d317,321
(2dCir.1995)(observingthatadefendantmighthaveinfringed[plaintiffs]exclusiverightto
preparederivativeworksbysynchronizingmusictoanaudiovisualwork,butthecourtneed
notresolvethatquestionascopying(andadefensetothisright)werealreadyproven).
65
25
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2. Reproduction and Distribution Rights

a. Historical Background
Untiltheearlytwentiethcentury,ownersofmusicalworkswerecompensatedprimarily
throughthereproductionanddistributionofsheetmusic.Salesofsheetmusicwerea
significantsourceofrevenueformusicpublishersforalongtime.66Andpricesforsheet
musicwere,astheyaretoday,setinthefreemarket.67
Bytheearly1900s,however,technologicaladvancesmademusicavailableforthefirst
timeviamechanicalrenderingsofsongscapturedinplayerpianorollsand
phonographrecords.68Althoughmusicpublishersinsistedthatphysicalembodiments
oftheirworkswerecopies,theSupremeCourtheldotherwiseinthe1908caseWhite
Smith Music Publishing v. Apollo,reasoningthatsuchreproductionswerenotinaform
thathumanbeingscouldseeandread.69
Withtheenactmentofthe1909CopyrightAct,however,CongressoverrodetheCourts
decisionandrecognizedcopyrightownersexclusiverighttomakeanddistribute,and
authorizethemakinganddistribution,ofphonorecordsi.e.,mechanical
reproductionsofmusicalworks.70Atthesametime,Congresswasconcernedabouta
lackofcompetitioninthemarketplaceinparticular,itwasallegedthattheAeolian
Company,amanufacturerofplayerpianos,wasseekingtobuyupexclusiverightsfrom
publisherstocreateamonopolyforpianorolls.71Toaddressthatconcern,Congress
simultaneouslycreatedacompulsorylicenseformechanicalreproductionsofmusical
worksthefirstcompulsorylicenseinU.S.copyrightlawestablishingastatutoryrate
of2centspercopy.72
See KOHNat674.By1919,asingledepartmentstorechainWoolworthswassellingover200
millioncopiesofsheetmusic.Id.at6.
66
67
Sheetmusicwasgenerallysoldfor10centspercopy.Id. at6.
68
Id. at67.
69
WhiteSmith Music Publg Co. v. Apollo Co.,209U.S.1,89,1718(1908).
H.R.REP.NO.602222,at68(1909);see alsoMiller v. Goody,139F.Supp.176,182(S.D.N.Y.
1956).
70
H.R.REP.NO.597083,pt.2,at5(1907);RUSSELLSANJEKUPDATEDBYDAVIDSANJEK,PENNIES
FROMHEAVEN2223(1996).
71
H.R.REP.NO.602222,at78;CopyrightActof1909,Pub.L.No.60349,1(e),35Stat.1075,
107576.Adjustedforinflation,the2centratewouldbemorethan50centstoday.Music
Licensing Hearings(statementofDavidM.Israelite,PresidentandChiefExecutiveOfficer,
NMPA).
72
26
U.S.CopyrightOffice
Thoughithasbeenamendedseveraltimes,the1909compulsorylicense,originallyset
forthinsection1(e)oftheAct,73continuesinforcetoday.IntheCopyrightActof1976,
Congressrecodifiedthecompulsorylicenseinsection115,andraisedthestatutoryrate
to2.75cents.74Atthattime,CongressalsocreatedtheCopyrightRoyaltyTribunal
(CRT)withfivecommissionersappointedbythePresidenttoadjusttheroyalty
ratethereafter.75TheCRTwasreplacedin1993bytheCopyrightArbitrationRoyalty
Panel(CARP)system;ratherthanpermanentappointees,theCARParbitratorswere
convenedforspecificrateproceedings.76TheCARPsystem,inturn,wasreplacedin
2004bythecurrentsystem,theCopyrightRoyaltyBoard(CRB),whichiscomposedof
threeadministrativejudgesappointedbytheLibrarianofCongress.77
In1995,CongressenactedtheDigitalPerformanceRightinSoundRecordingsActof
1995(DPRSRA),which,inadditiontograntingadigitalperformancerightforsound
recordings,amendedsection115toexpresslycoverthereproductionanddistributionof
musicalworksbydigitaltransmission,orDPDs.78The1995legislationrecognizedwhat
CopyrightActof19091(e).
73
H.R.REP.NO.941476,at111(1976),reprinted in1976U.S.C.C.A.N.5659,5726.Notably,the
RegisterofCopyrightshadproposedeliminationofthecompulsorylicenseintheprocessleading
uptotheadoptionofthe1976CopyrightAct,butmusicpublishersandcomposersultimately
chosetoopposesuchachange,optinginsteadforthethreequartercentrateincrease.See U.S.
COPYRIGHTOFFICE,88THCONG.,REP.OFTHEREGISTEROFCOPYRIGHTSONTHEGENERALREVISION
OFTHEU.S.COPYRIGHTLAW33,36(Comm.Print1961)(GENERALREVISIONOFCOPYRIGHT
REPORT);S.REP.NO.94473,at9192(1975);see also Music Licensing Reform: Hearing Before the
Subcomm. on Intell. Prop. of the S. Comm. on the Judiciary,109thCong.(2005)(Music Licensing
Reform Hearing) (statementofMarybethPeters,RegisterofCopyrights),available at
http://copyright.gov/docs/regstat071205.html(statingthatpublishersandsongwriterswere
concernedthateliminationofthestatutorylicensewouldcauseunnecessarydisruptionsinthe
musicindustry).
74
CopyrightActof1976,Pub.L.No.94553,801802,90Stat.2541,259496.
75
CopyrightRoyaltyTribunalReformActof1993,Pub.No.103198,802,107Stat.2304,2305
(1993).
76
17U.S.C.801805;CopyrightRoyaltyandDistributionReformActof2004,Pub.L.No.108
419,118Stat.2341.ThestatutecallstheratesettingbodytheCopyrightRoyaltyJudges.See17
U.S.C.801.ButitismorecommonlyreferredtoastheCopyrightRoyaltyBoard,includingin
theregulations,andthisreportusesthatconvention.See37C.F.R.301.1(TheCopyright
RoyaltyBoardistheinstitutionalentityintheLibraryofCongressthatwillhousetheCopyright
RoyaltyJudges....).
77
SeeS.REP.NO.104128,at10(1995),reprinted in1995U.S.C.C.A.N.356,357(Thepurposeof
[thisAct]istoensurethatperformingartists,recordcompaniesandotherswhoselivelihood
dependsuponeffectivecopyrightprotectionforsoundrecordings,willbeprotectedasnew
technologiesaffectthewaysinwhichtheircreativeworksareused....Inaddition,thebill
clarifiestheapplicationoftheexistingreproductionanddistributionrightsofmusicalworkand
78
27
U.S.CopyrightOffice
isoftenreferredtoaspassthroughlicensingforDPDs,inthatitallowsasection115
licensee,suchasarecordlabel,toauthorizeathirdpartyservicetodistributeDPDsof
theworkscoveredunderitslicense.79
Significantly,theexpressrecognitionofdigitaltransmissionsofmusicalworksasaright
coveredbysection115ledtoalengthyrulemakingproceedingcommencedbythe
CopyrightOfficein2001todeterminethescopeandapplicationofthesection115
compulsorylicensewithrespecttovarioususes,whichincludedthequestionwhether
interactivestreamingserviceswererequiredtoprocuremechanicallicensesunder
section115inadditiontoperformancelicenses.80In2008,recognizingthatstreaming
servicesmakeandrelyuponservercopiesandotherreproductionsofmusicalworksin
ordertooperate,theOfficeconcludedthatstreamingservicescouldutilizethesection
115compulsorylicensingprocesstocoverthereproductionsmadetofacilitate
streaming.81In2009,theCRBadoptedthefirststatutoryratesandtermsforinteractive
streamingservices.82Asaresultofthesedevelopments,ondemandstreamingservices
seekbothmechanicalandPROlicensesforthemusicalworkstheyuse.
b. Mechanical Rights Licensing

Statutory Licensing
Undersection115,thosewhoseektomakeanddistributereproductionsofamusical
workmayobtainalicensetodosobyservinganoticeofintent(NOI)onthe
copyrightowner,nolaterthanthirtydaysaftermaking,andbeforedistributing,any
phonorecords.83OnceapersonhasservedtheNOI,thepersonmustprovidestatements
ofaccountandpaythestatutorilyprescribedroyaltiesonamonthlybasis.84Ifthename
andaddressoftheowneroftheworkcannotbeidentifiedfromthepublicrecordsofthe
soundrecordingcopyrightownersinthecontextofcertaindigitaltransmissions.); see also17

U.S.C.115(c)(3)(A).
17U.S.C.115(c)(3)(A).
79
CompulsoryLicenseforMakingandDistributingPhonorecords,IncludingDigital
PhonorecordDeliveries,73Fed.Reg.40,802,40,80405(July18,2008).
80
CompulsoryLicenseforMakingandDistributingPhonorecords,IncludingDigital
PhonorecordDeliveries,73Fed.Reg.66,173,66,174(Nov.7,2008)(Theinterimregulation
clarifiesthat(1)wheneverthereisatransmissionthatresultsinaDPD,allreproductionsmade
forthepurposeofmakingtheDPDarealsoincludedaspartoftheDPD,and(2)limited
downloadsqualifyasDPDs.).
81
MechanicalandDigitalPhonorecordDeliveryRateDeterminationProceeding,74Fed.Reg.
4510,451415(Jan.26,2009);37C.F.R.385.1385.5,385.10385.17.
82
17U.S.C.115(b)(1).
83
17U.S.C.115(c)(5).
84
28
U.S.CopyrightOffice
CopyrightOffice,theusermayfiletheNOIwiththeOffice.85Inthatcase,theusermust
payafilingfeetotheOfficebutdoesnotneedtodepositroyalties.86
Thecompulsorylicenseundersection115isavailableonlyafterarecordinghasbeen
madeanddistributedtothepublicundertheauthorityofthecopyrightowner.87
Consequently,theinitialrecordingofamusicalwork,orfirstuse,doesnotfallunder
thecompulsorylicense,andthecopyrightownerhastheauthoritytodeterminewhether
andhowtheworkisfirstreproducedanddistributed.Onceaworkiseligiblefor
statutorylicensing,section115limitsthewaytheworkcanbeexploited.Asection115
licenseincludestherighttomakeamusicalarrangementofthesongbutdoesnotpermit
theusertochangethebasicmelodyorfundamentalcharacterofthework.88
Asnotedabove,theCRBistheadministrativebodyresponsibleforestablishing
statutoryratesandtermsunderthesection115license,aprocessthatbystatutetakes
placeeveryfiveyears.89Whilecopyrightownersandusersarefreetonegotiate
voluntarylicensesthatdepartfromthestatutoryratesandterms,inpracticaleffectthe
CRBsetrateactsasaceilingforwhattheownermaycharge.Ratesforthelicenseare
establishedunderastandardsetforthinsection801(b)(1)oftheCopyrightAct,which
requirestheCRBtoweighseveralpolicyorientedobjectives:
(A) Tomaximizetheavailabilityofcreativeworkstothepublic.
(B) Toaffordthecopyrightownerafairreturnforhiscreativeworkand
thecopyrightuserafairincomeunderexistingeconomicconditions.
(C) Toreflecttherelativerolesofthecopyrightownerandthecopyright
userintheproductmadeavailabletothepublicwithrespectto
relativecreativecontribution,technologicalcontribution,capital
investment,cost,risk,andcontributiontotheopeningofnewmarkets
forcreativeexpressionandmediafortheircommunication.
(D) Tominimizeanydisruptiveimpactonthestructureoftheindustries
involvedandongenerallyprevailingindustrypractices.90
Theratescurrentlyapplicableundersection115weretheresultofanindustrywide
negotiatedagreementthatwassubmittedtotheCRBasasettlementofthemostrecent
17U.S.C.115(b)(1).
85
See 17U.S.C.115(c)(1);37C.F.R.201.18(f)(3).
86
KOHNat79293;see 17U.S.C.115(a)(1).
87
17U.S.C.115(a)(2).
88
KOHNat742;17U.S.C.804(b)(4).
89
17U.S.C.801(b)(1).
90
29
U.S.CopyrightOffice
ratesettingproceeding.91Thecurrentratetomakeanddistributepermanentdownloads
orphysicalphonorecordsofamusicalworkis9.1centspercopy.92Forringtones,the
rateis24centsperuse.93Theroyaltyratetomakereproductionsofmusicalworksin
connectionwithinteractivestreaming,limiteddownloadservices,andcertainother
servicesisapercentageoftheservicesrevenuerangingfrom10.5%to12%,subjectto
certainminimumroyaltyfloors,andafterdeductingroyaltiespaidbytheserviceforthe
publicperformanceofthoseworks.94Itmayseemcounterintuitivethatringtones
whichtypicallyuseonlyshortexcerptsofmusicalworkshaveasignificantlyhigher
royaltyratethanfulllengthreproductions.Becauseringtonesabbreviatethefulllength
work,itwasnotimmediatelyclearwhetherringtoneswereeligibleforthesection115
license.Asaresult,manyringtonesellersenteredintoprivatelynegotiatedlicensing
arrangementswithpublishersatrateswellabovethestatutoryrateforthefulluseofthe
song.95In2006,theCopyrightOfficeresolvedthesection115issue,opiningthat
ringtonesweresubjecttocompulsorylicensing.96Butintheensuingratesetting
proceedingbeforetheCRB,musicpublisherswereabletointroducethepreviously
negotiatedagreementsasmarketplacebenchmarks,andasaresultsecuredamuch
higherrateforringtonesthantherateforfullsongs.97
Voluntary Licenses
Section115providesthatalicensethatisvoluntarilynegotiatedbetweenacopyright
owneranduserwillbegiveneffectinlieuoftheratesandtermssetbytheCRB.98
Althoughtheuseofthesection115statutorylicensehasincreasedinrecentyearswith
theadventofdigitalprovidersseekingtoclearlargequantitiesoflicenses,mechanical
licensingisstilllargelyaccomplishedthroughvoluntarylicensesthatareissuedthrough
AdjustmentofDeterminationofCompulsoryLicenseRatesforMechanicalandDigital
Phonorecords,78Fed.Reg.67,938,67,939(Nov.12,2013).
91
Forsongsoverfiveminutes,therateishigher1.75centsperminuteorfractionthereof.37
C.F.R.385.3(a).
92
93
37C.F.R.385.3(b).
94
37C.F.R.385.12385.14,385.23.
MechanicalandDigitalPhonorecordDeliveryRateAdjustmentProceeding,71Fed.Reg.64,303,
64,30809(Nov.1,2006)(discussingvoluntarylicenseagreementsgrantingthelabelstherightto
createringtonesatspecifiedmutuallynegotiatedroyaltyrates).
95
Id.at64,303.
96
MechanicalandDigitalPhonorecordDeliveryRateDeterminationProceeding,74Fed.Reg.at
451718;id.at4522(explainingthatthoselicensesconstitutevaluablerateevidencefromthe
marketplaceforringtonesbutnotforotherproductsatissueinthisproceeding(i.e.,CDsand
permanentdownloads)).
97
17U.S.C.115(c)(3)(E)(i).
98
30
U.S.CopyrightOffice
amechanicallicensingagencysuchasHFAorbythepublisherdirectly.99WhileHFA
andotherlicensorstypicallyincorporatethekeyelementsofsection115intotheirdirect
licenses,theymayalsovarythosetermstosomedegree,suchasbypermittingquarterly
accountingsratherthanthemonthlystatementsrequiredunderthestatute.100Thatsaid,
asobservedabove,thetermsofthestatutorylicenseactasaghostintheattic,effectively
establishingthemaximumamountacopyrightownercanseekunderanegotiated
mechanicallicense.101
Recent Reform Efforts
Thelastsignificantlegislativeefforttomodernizemechanicallicensingtookplacenearly
adecadeago.In2006,RepresentativesLamarSmithandHowardBermanintroduced
theSection115ReformAct(SIRA).102SIRAwouldhavecreatedablanketmechanical
licensefordigitalservices,whileleavingtheremainderofsection115intactforphysical
reproductions(andalsonotaffectingperformancerights).
SIRAincludedseveralnotablefeatures.103Itwouldhaveestablishedageneral
designatedagentwiththepossibilityofadditionaldesignatedagentsprovidedthey
representedatleast15%ofthemusicpublishingmarket.Copyrightownerswouldelect
toberepresentedbyadesignatedagent,withthegeneraldesignatedagentrepresenting
anycopyrightownersthatfailedtomakesuchanelection.Eachdesignatedagent
wouldhavebeenrequiredtomaintainasearchableelectronicdatabaseofmusicalworks
representedbythatagent.Thecostofestablishingsuchdatabaseswouldhavebeen
sharedbydesignatedagentsandlicensees,withcostsharingamountsdeterminedby
theCRB.TheCRBwouldalsohaveestablishedratesandtermsforthelicenseitself,and
therewouldhavebeenaninterimratesettingmechanismfornewtypesofservices.
Therewerealsoprovisionsaddressingdistributionofunclaimedfundsandauditrights.
SIRAenjoyedsupportfromkeyindustryparticipants,includingNMPA,DiMA,SGA,
andthePROs.104AlthoughthebillwasforwardedtothefullJudiciaryCommittee,due
tooppositionfromotherparties,itwasnotreportedout.105
W.JonathanCardi,berMiddleman: Reshaping the Broken Landscape of Music Copyright,92IOWA

L.REV.835,84142(2007).
99
KOHNat771.
100
Id. at77172.
101
SIRA,H.R.5553,109thCong.(2006).SIRAwaslaterincorporatedintotheCopyright
ModernizationActof2006,H.R.6052,109thCong.(2006).
102
See generallyCopyrightModernizationActof2006,H.R.6052;SkylaMitchell,Reforming Section

115: Escape from the Byzantine World of Mechanical Licensing,24CARDOZOARTS&ENT.L.J.1239,
1271(2007).
103
Mitchell,Reforming Section 115: Escape from the Byzantine World of Mechanical Licensingat1277.
GroupssuchasPublicKnowledgeandtheElectronicFrontierFoundationopposedSIRAbecause
104
31
U.S.CopyrightOffice
SIRAfollowedandwasperhapsanindustryresponsetoanearlier2005proposal
fromtheCopyrightOffice.ThenRegisterofCopyrightsMarybethPeterstestifiedbefore
Congresstoproposea21stCenturyMusicReformAct.106Amongotherthings,that
proposalwouldhaveeffectivelyrepealedthesection115statutorylicense,andwould
haveauthorizedtheestablishmentofmusicrightsorganizations(MROs)thatcould
licensebothperformanceandmechanicalrightsonablanketbasis.Theproposalalso
conditionedanMROsrecoveryofstatutorydamagesontheMROhavingmadepublicly
availablethelistofworksitwasauthorizedtolicense.Whileindustryparticipants
agreedinprinciplewiththebasicgoalsoftheCopyrightOfficesproposal,they
expressedconcernsaboutmanyofitsspecifics,includingthelackofalimitonthe
numberofMROs,antitrustissues,andadministrativeburdens.107
3. Public Performance Rights

a. The PROs
Asmentionedabove,althoughmusicalcompositionswereexpresslymadesubjectto
copyrightprotectionstartingin1831,Congressdidnotgrantmusiccreatorsthe
exclusiverighttopubliclyperformtheircompositionsuntil1897.108Thoughthisright
representedanewwayforcopyrightownerstoderiveprofitfromtheirmusicalworks,
thesheernumberandfleetingnatureofpublicperformancesmadeitimpossiblefor
copyrightownerstoindividuallynegotiatewitheachuserforeveryuse,ordetectevery
caseofinfringement.109ASCAPwasestablishedin1914,followedbyotherPROs,to
ofitsprovisionsregardingtemporarycopiesandrecognitionthatinteractivestreaminginvolves
themakingofDPDs.Id. at127781.
SeeReforming Section 115 of the Copyright Act for the Digital Age:Hearing Before the Subcomm. on
Courts, the Internet, and Intell. Prop. of the H. Comm. on the Judiciary,110thCong.4(2007)
(Reforming Section 115 Hearing)(statementofRep.HowardCoble).
105
See generally Copyright Office Views on Music Licensing Reform: Hearing Before the Subcomm. on
Courts, the Internet, and Intell. Prop. of the H. Comm. on the Judiciary,109thCong.2136(2005)
(Copyright Office Views on Music Licensing Reform Hearing)(statementofMarybethPeters,
RegisterofCopyrights).
106
Id.at5657(letterfromJonathanPotter,ExecutiveDirector,DiMA);id.at5960(letterfrom
StevenM.Marks,RIAA);id.at99(commentsofASCAP);id.at6264(commentsofNMPA).
107
SeeSteveWilf,The Making of the PostWar Paradigm in American Intellectual Property Law,31

COLUM.J.L.&ARTS139,176(2008);NoelL.Hillman,Intractable Consent: A Legislative Solution to
the Problem of Aging Consent Decrees in United States v. ASCAP and United States v. BMI,8FORDHAM
INTELL.PROP.MEDIA&ENT.L.J.733,737(1998).
108
BMI v. CBS,441U.S.1,45(1979); see alsoAldenRochelle, Inc. v. ASCAP,80F.Supp.888,891

(S.D.N.Y.1948).
109
32
U.S.CopyrightOffice
addressthelogisticalissueofhowtolicenseandcollectpaymentforthepublic
performanceofmusicalworksinawiderangeofsettings.110
Today,thePROsprovidevariousdifferenttypesoflicensesdependinguponthenature
oftheuse.Anyonewhopubliclyperformsamusicalworkmayobtainalicensefroma
PRO,includingterrestrial,satelliteandinternetradiostations,broadcastandcable
televisionstations,onlineservices,bars,restaurants,liveperformancevenues,and
commercialestablishmentsthatplaybackgroundmusic.
Mostcommonly,licenseesobtainablanketlicense,whichallowsthelicenseetopublicly
performanyofthemusicalworksinaPROsrepertoireforaflatfeeorapercentageof
totalrevenues.111Someusersoptforablanketlicenseduetoitsbroadcoverageof
musicalworksandrelativesimplicityascomparedtoothertypesoflicenses.Large
commercialestablishmentssuchasbars,restaurants,concertvenues,stores,andhotels
oftenenterintoblanketlicensestocovertheiruses,payingeitherapercentageofgross
revenuesoranannualflatfee,dependingontheestablishmentandthetypeandamount
ofuse.112TerrestrialradiostationsobtainblanketlicensesfromPROsaswell,usuallyby
meansoftheRMLC.113Manytelevisionstations,throughtheTMLC,alsoobtainblanket
licenses.114
Lesscommonlyusedlicensesincludetheperprogramorpersegmentlicense,which
allowsthelicenseetopubliclyperformanyofthemusicalworksinthePROsrepertoire
forspecifiedprogramsorpartsoftheirprogramming,inexchangeforaflatfeeora
percentageofthatprogramsadvertisingrevenue.115Unlikeablanketlicense,theper
programorpersegmentlicenserequiresmoredetailedreportinginformation,including
programtitles,thespecificmusicselectionsused,andusagedates,makingthelicense
moreburdensomeforthelicenseetoadminister.116
Userscanalsolicensemusicdirectlyfrommusicpublishersthroughadirectlicenseora
sourcelicense.Adirectlicenseissimplyalicenseagreementdirectlynegotiated
BMI v. CBS,441U.S.at45; see alsoAldenRochelle,80F.Supp.at891.
110
Meredith Corp.,1F.Supp.3dat190;BMI v. CBS,441U.S.at5.
111
See KOHNat1263,127580.TheCopyrightActexemptsmanysmallcommercialestablishments
fromtheneedtoobtainapublicperformancelicense.See17U.S.C.110(5).
112
DavidOxenford,What is the RMLC, And Why Should a Radio Station Pay Their Bill?,BROAD.L.
BLOG(Aug.24,2012),http://www.broadcastlawblog.com/2012/08/articles/whatisthermlcand
whyshouldaradiostationpaytheirbill.
113
114
Meredith Corp.,1F.Supp.3dat18990.
See generallyLaurenM.Bilasz,Note: Copyrights, Campaigns, and the Collective Administration of
Performance Rights: A Call to End Blanket Licensing of Political Events,32CARDOZOL.REV.305,323&
nn.111112(2010)(descriptionsofeachlicense).
115
116
See, e.g.,KOHNat1266(discussingperprogramlicenses).
33
U.S.CopyrightOffice
betweenthecopyrightownerandtheuserwhointendstopubliclyperformthemusical
work.Sourcelicensesarecommonlyusedinthemotionpictureindustry,becausethe
PROsareprohibitedfromlicensingpublicperformancerightsdirectlytomovietheater
owners.117Instead,filmproducerslicensepublicperformancerightsforthemusicused
infilmsatthesametimeasthesynchronizationrights,andpasstheperformancerights
alongtothetheatersthatwillbeshowingtheirfilms.118Inthecontextofmotion
pictures,sourcelicensesdonottypicallyencompassnontheatricalperformances,such
asontelevision.Thus,televisionstations,cablecompanies,andonlineservicessuchas
NetflixandHulumustobtainpublicperformancelicensesfromthePROstocoverthe
publicperformanceofmusicalworksintheshowsandmoviestheytransmittoend
users.119
b. Antitrust Oversight
Basic Antitrust Principles
Unlikethemechanicalright,thepublicperformanceofmusicalworksisnotsubjectto
compulsorylicensingundertheCopyrightAct.But,asdescribedbelow,ASCAPand
BMIaresubjecttogovernmentantitrustregulationthroughlongstandingconsent
decrees.AndwhileneitherSESACnorGMRissubjecttosuchdirectantitrust
regulation,each,ofcourse,mustabidebygenerallyapplicableantitrustlaw,whichis
enforceablebythegovernmentorthroughprivatecausesofaction.SESAC,forexample,
hasrecentlybeenthesubjectofprivateantitrustsuits,asdiscussedbelow.Adetailed
explanationoftheantitrustrationalethatunderliesthePROconsentdecreesisbeyond
thescopeofthisstudy.Butabriefdiscussionofsomebasicantitrustprinciplesmaybe
helpfulinunderstandingthemotivationbehindthedecrees.
Section1oftheShermanAntitrustActprohibits[e]verycontract,combinationinthe
formoftrustorotherwise,orconspiracy,inrestraintoftradeorcommerceamongthe
several[s]tates.120AstheSupremeCourthasopined,however,Congresscouldnot
haveintendedaliteralinterpretationofthewordevery,andasaresult,courts
Thisprohibitionwasaresultofantitrustlitigationbroughtbymovietheaterownersinthe
1940s.AldenRochelle,80F.Supp.888;see alsoChristianSeyfert,Copyright and AntiTrust Law:
Public Performance Rights Licensing of Musical Works into Audiovisual Media6,20(Sept.1,2005)
(unpublishedLL.M.thesis,GoldenGateUniversitySchoolofLaw),available athttp://
digitalcommons.law.ggu.edu/theses/13at19.
117
See id.at19.
118
Id.;see alsoNetflixFirstNoticeCommentsat12;ASCAP Reports Increased Revenues in 2011,

ASCAP(Mar.8,2012),http://www.ascap.com/press/2012/0308_ascapreports.aspx(reflecting
blanketlicenseswithNetflixandHulu).LicensingofperformancerightsfromSESACandGMR
occurswithoutdirectantitrustoversight,andthosesmallerPROsmayrefusetolicensetheir
repertoirestopotentiallicensees.
119
15U.S.C.1.
120
34
U.S.CopyrightOffice
analyze[]mostrestraintsunderthesocalledruleofreason.121Theruleofreasontest
requiresacourttonotonlyfindarestraintoftrade,butalsodeterminewhetherthat
restraintisunreasonable.122TheSupremeCourthasalsorecognized,however,that
[o]nceexperiencewithaparticularkindofrestraintenablestheCourttopredictwith
confidencethattheruleofreasonwillcondemnit,ithasappliedaconclusive
presumptionthattherestraintisunreasonable.123Thus,certainarrangements
includingpricefixingagreementsaredeemedperse violationsofsection1.124
Atyingarrangementisanotherkindofbusinesspracticethatraisesantitrustconcerns.
Atyingarrangementisanagreementbyapartytoselloneproductbutonlyonthe
conditionthatthebuyeralsopurchasesadifferent(ortied)product.125Such
arrangementsareunlawfulifthesellerhasappreciableeconomicpowerinthetying
productmarketandifthearrangementaffectsasubstantialvolumeofcommerceinthe
tiedmarket.126ButastheFederalTradeCommission(FTC)observes,[t]helawon
tyingischanging.127WhiletheSupremeCourthastreatedsometieinsasperseillegal
inthepast,lowercourtshavestartedtoapplythemoreflexibleruleofreasontoassess
thecompetitiveeffectsoftiedsales.128
Department of Justice Consent Decrees
Since1941,ASCAPandBMIslicensingpracticeshavebeensubjecttoantitrustconsent
decreesoverseenbytheAntitrustDivisionoftheDOJandenforcedbyfederaldistrict
courtsinNewYorkCity.129Thoseconsentdecreeswereimplementedinreactionto
allegedanticompetitivepracticesofASCAPandBMI.Specifically,whenoriginally
formed,bothPROsacquiredtheexclusiverighttonegotiatememberspublic
performancerights,andforbadetheirmembersfromenteringintodirectlicensing
Arizona v. Maricopa Cnty. Med. Socy,457U.S.332,34243(1982).
121
Associated Press v. United States,326U.S.1,27(1945).
122
Arizona,457U.S.at34344.
123
Id.at34445.
124
N. Pac Ry. Co. v. United States,356U.S.1,5(1958).
125
Eastman Kodak Co. v. Image Technical Servs., Inc.,504U.S.451,4662(1992).
126
Tying the Sale of Two Products,FTC,http://www.ftc.gov/tipsadvice/competitionguidance/
guideantitrustlaws/singlefirmconduct/tyingsaletwoproducts(lastvisitedJan.26,2015).
127
Id.
128
See generally United States v. BMI,275F.3d168,17172(2dCir.2001)(describingthehistory);see

also Antitrust Consent Decree Review,U.S.DOJ,http://www.justice.gov/atr/cases/ascapbmidecree
review.html(lastvisitedJan.26,2015).
129
35
U.S.CopyrightOffice
arrangements.Additionally,bothofferedonlyblanketlicensescoveringallofthemusic
intheirrespectiverepertoires.130
Inthe1930s,theDOJsAntitrustDivisioninvestigatedASCAPforanticompetitive
conductspecificallythatASCAPslicensingarrangementsconstitutedpricefixing
and/orunlawfultying.131Thegovernmentsubsequentlyfiledfederalcourtactionsin
1934and1941,arguingthattheexclusiveblanketlicenseastheonlylicenseofferedat
thetimewasanunlawfulrestraintoftradeandthatASCAPwaschargingarbitrary
pricesasaresultofanillegalcopyrightpool.132Whilethefirstcasewasneverfully
litigatedafterthegovernmentwasgrantedamidtrialcontinuance,thelatteractionwas
settledwiththeimpositionofaconsentdecreein1941.133Thatconsentdecreehasbeen
modifiedtwice,firstin1950andmostrecentlyin2001.134TheUnitedStatesalso
pursuedantitrustclaimsagainstBMI,resultinginasimilarconsentdecreein1941.135
The1941BMIconsentdecreewassupersededbyanewdecreein1966,whichwaslast
amendedin1994.136
AlthoughtheASCAPandBMIconsentdecreesarenotidentical,theysharemanyofthe
samefeatures.Asmostrelevanthere,thePROsmayonlyacquirenonexclusiverightsto
licensememberspublicperformancerights;mustgrantalicensetoanyuserthat
applies,ontermsthatdonotdiscriminateagainstsimilarlysituatedlicensees;andmust
acceptanysongwriterormusicpublisherthatappliestobeamember,aslongasthe
writerorpublishermeetscertainminimumstandards.137
ASCAPandBMIarealsorequiredtoofferalternativelicensestotheblanketlicense.
Oneoptionistheadjustablefeeblanketlicense,ablanketlicensewithacarveoutthat
reducestheflatfeetoaccountformusicdirectlylicensedfromPROmembers.Under
theconsentdecrees,ASCAPandBMImustalsoprovide,whenrequested,throughto
theaudiencelicensestobroadcastnetworksthatcoverperformancesnotonlybythe
networksthemselves,butalsobyaffiliatedstationsthatfurthertransmitthose
ChristianSeyfert,Copyright and AntiTrust Law: Public Performance Rights Licensing of Musical

Works into Audiovisual Mediaat6,20; see alsoWilfat177.
130
Seyfert,Copyright and AntiTrust Law: Public Performance Rights Licensing of Musical Works into
Audiovisual Mediaat2021.
131
BMI v. CBS,441U.S.at10.
132
Audiovisual Mediaat2021.
133
134
BMI v. CBS,441U.S.at12n.20.
135
Audiovisual Mediaat22;see also BMIConsentDecree.
136
ASCAPConsentDecreeIV.BC,VI,VIII,XI;BMIConsentDecree IV.A,V,VIII.
137
36
U.S.CopyrightOffice
performancesdownstream.138ASCAPandBMIarealsorequiredtoprovideper
programandpersegmentlicenses,asaredescribedabove.139
ASCAPisexpresslybarredfromlicensinganyrightsotherthanitsmemberspublic
performancerights(i.e.,ASCAPmaynotlicensemechanicalorsynchronization
rights).140AlthoughBMIsconsentdecreelacksasimilarprohibition,inpracticeBMI
doesnotlicenseanyrightsotherthanpublicperformancerights.141
Finally,andperhapsmostsignificantly,prospectivelicenseesthatareunabletoagreeto
aroyaltyratewithASCAPorBMImayseekadeterminationofareasonablelicensefee
fromoneoftwofederaldistrictcourtjudgesintheSouthernDistrictofNewYork.142The
ratecourtproceduresarediscussedingreaterdetailbelow.
InresponsetorequestsbyASCAPandBMItomodifycertainprovisionsoftheirdecrees,
theDOJsAntitrustDivisionannouncedinJune2014thatitwouldbeevaluatingthe
consentdecrees,andhassolicitedandreceivedextensivepubliccommentsonwhether
andhowthedecreesmightbeamended.143Specifically,bothASCAPandBMIseekto
modifytheconsentdecreestopermitpartialgrantsofrights,toreplacethecurrent
ratesettingprocesswithexpeditedarbitration,andtoallowASCAPandBMItoprovide
bundledlicensesthatincludemultiplerightsinmusicalworks.144TheDOJhas
expresseditsintenttoexaminetheoperationandeffectivenessoftheConsentDecrees,
particularlyinlightofthechangesinthewaymusichasbeendeliveredandconsumed
sincethemostrecentamendmentstothosedecrees.145Atthesametime,theDOJis
ASCAPConsentDecree V;BMIConsentDecreeIX.
138
ASCAPConsentDecree II.JK,VII;BMIConsentDecreeVIII.B.Notethatunderthe
ASCAPconsentdecree,thepersegmentlicensehasanumberofconditionsthatmustbemet
beforeitcanbeused.ASCAPConsentDecreeVII.
139
ASCAPConsentDecree IV.A.
140
SeeBMI,CommentsonDepartmentofCommerceGreenPaperat45(Nov.13,2013),available
at http://www.ntia.doc.gov/files/ntia/bmi_comments.pdf.
141
ASCAPConsentDecree IX;BMIConsentDecreeXIV.
142
Antitrust Consent Decree Review,U.S.DOJ,http://www.justice.gov/atr/cases/ascapbmidecree

143
ASCAP,CommentsSubmittedinResponsetotheDOJsAntitrustConsentDecreeReviewat
18,22,31(Aug.6,2014),available at
http://www.justice.gov/atr/cases/ascapbmi/comments/307803.pdf(ASCAPAntitrustConsent
DecreeReviewComments); BMI,CommentsSubmittedinResponsetotheDOJsAntitrust
ConsentDecreeReviewat2(Aug.6,2014),available at http://www.justice.gov/atr/cases/ascapbmi/
comments/307859.pdf(BMIAntitrustConsentDecreeReviewComments).
144

145
37
U.S.CopyrightOffice
conductingarelatedinvestigationtodeterminewhethertherehasbeenacoordinated
effortamongmusicpublishersandPROstoraiseroyaltyrates.146
Key Antitrust Cases
InadditiontotheDOJactionsthatledtotheadoptionoftheconsentdecrees,PRO
practiceshavebeenthesubjectofprivateantitrustactions,includinganumberrelatedto
theconsentdecrees.Thedecisionsinthesecasesservetohighlightcourtsapproachto
thecollectivelicensingofpublicperformancerightsandadministrationoftheconsent
decrees.
Inthe1979SupremeCourtcaseofBMI v. CBS,CBShadsuedASCAPandBMI,alleging
thattheblanketlicenseviolatedantitrustlawsbyconstitutingillegalpricefixing,an
unlawfultyingarrangement,aconcertedrefusaltodeal,andamisuseofcopyrights.147
Ratherthandeclaringtheblanketlicensesperse unlawful,theCourtheldthatthey
shouldbeevaluatedunderaruleofreasontest,observingthatablanketlicensecould
beusefultoaddresstheproblemofnegotiatingthousandsofindividuallicenses.The
Courtalsonotedasrelevantthefactthattherewerenolegal,practical,orconspiratorial
impediment[s]toobtainingdirectlicenses,indicatinglicenseeshavearealchoiceinthe
directlicenseasanalternativetotheblanketlicense.148Onremand,thecourtofappeals
upheldtheblanketlicenseundertheruleofreason,explainingthatitdidnot
unreasonablyrestraincompetitionbecauseCBScouldfeasiblyobtaindirectlicenses
fromcopyrightowners.149
AftertheBMI v.CBSlitigation,anumberofothercourtsexaminedtheblanketlicense,
andsustaineditagainstantitrustchallengesunderruleofreasonanalysis.InBuffalo
Broadcasting v. ASCAP,theSecondCircuitconcludedthat,inthecontextoflocal
televisionstations,theblanketlicensedidnotviolatetheShermanActbecauseper
programlicenses,directlicenses,andsourcelicenseswererealisticalternativestothe
blanketlicense.150AfederaldistrictcourtintheDistrictofColumbiareachedasimilar
conclusionwithrespecttocablestations.151
EdChristman,Dept. of Justice Sends Doc Requests, Investigating UMPG, Sony/ATV, BMI and
ASCAP Over Possible Coordination,BILLBOARD(July13,2014),http://www.billboard.com/biz/
articles/news/publishing/6157513/deptofjusticesendsdocrequestsinvestigatingumpg
sonyatv.MembersoftheDOJAntitrustDivisionattendedandobservedtheOfficesroundtables
forthisstudyinNashvilleandNewYork.
146
147
148
Id.at24.
149
CBS v. ASCAP,620F.2d930,93839(2dCir.1980).
Buffalo Broad. v. ASCAP,744F.2dat92632;see also id.at934(Winter,J.,concurring)([S]olong

ascomposersor[publishers]havenohorizontalagreementamongthemselvestorefrainfrom
150
38
U.S.CopyrightOffice
Morerecentlitigationhasinvolvedroyaltyratedisputes.In2012,theSecondCircuit
addressedratedisputesinvolvingASCAPandBMI,ontheonehand,andDMX,a
backgroundmusicservice,ontheother,regardingtheratetobepaidforanadjustable
feeblanketlicense.152Inarguingforalowerrate,DMXpointedtodirectlicensesithad
enteredintowithanumberofcopyrightowners,mostofthemsmallerpublishers,on
relativelyfavorabletermsforDMX.153DMX,however,alsoreliedonadirectlicense
fromSony/ATV,amajormusicpublisher.ThatdealgaveSony/ATVaproratashareof
thesameannualrateasothersmallerpublishers,butalsoprovidedSonya$2.4million
advanceanda$300,000administrativefee.154Thecourtfoundthisandtheotherdirect
dealsenteredintobyDMXtobepersuasivebenchmarksandthattheratecourts
reasonablyconsideredDMXsdirectlicensesintheirratedeterminations.Althoughthe
PROsarguedthatthesubstantialadvancepaidtoSony/ATVrenderedthatlicensean
inadequatebasistosetratesfortheremainderofpublisherscoveredbyPROlicenses,
thecourtofappealsaffirmedtheratesadoptedbytheratecourts.155
TherehasalsobeenrecentlitigationbetweenthePROsandPandora,theinternetradio
service.In2011and2013,respectively,inresponsetodemandsbytheirmajorpublisher
members,ASCAPandBMIbothamendedtheirrulestoallowmusicpublishersto
withdrawfromPROrepresentationtherighttolicensetheirpublicperformancerights
fornewmediausesi.e.,digitalstreamingserviceswhilestillallowingthePROsto
licensetootheroutletsontheirbehalf.156Asaresult,Pandorafacedwithapotential
lossofPROlicensingauthorityforthemajorpublisherscatalogsproceededto
negotiatelicensesdirectlywithEMIMusicPublishingLtd.(EMI),157Sony/ATVand
UMPGatvaryingratesthatbroughtthepublishershigherfeesthanthosetheywere
receivingunderthePROsystem.Pandora,however,challengedthepublisherspartial
withdrawalofrightsbeforeboththeASCAPandBMIratecourts.Ineachcasethough
applyingslightlydifferinglogicthecourtruledthatunderthetermsoftheconsent
sourceordirectlicensingandthereisnootherartificialbarrier,suchasastatute,totheiruse,a
nonexclusiveblanketlicensecannotrestraincompetition.).
Natl Cable Television Assn, Inc. v. BMI,772F.Supp.614,628(D.D.C.1991).
151
BMI v. DMX,683F.3dat35,43.
152
Id.at38.
153
Id.
154
Id. at4749.
155
In re Pandora Media, Inc.,Nos.12cv8035,41cv1395,2013WL5211927,at*2(S.D.N.Y.Sept.17,
2013);BMI v. Pandora Media, Inc.,Nos.13cv4037,64cv3787,2013WL6697788,at*23(S.D.N.Y.

Dec.19,2013).
156
Notlongafterward,EMIsmusiccatalogwasboughtbySony/ATV.In re Pandora,2013WL
5211927,at*3.
157
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U.S.CopyrightOffice
decrees,musicpublisherscouldnotwithdrawselectedrights;rather,apublisherssong
catalogmustbeeitherallinoralloutofthePRO.158
Followingtheserulings,thedistrictcourtheldabenchtrialandissuedadecisiononthe
meritsoftheratedisputebetweenASCAPandPandora.159RelyingonPandoras
negotiatedagreementswiththemajorpublishersasbenchmarks,ASCAPsoughtarate
of1.85%ofrevenuesfor20112012,2.50%for2013,and3.00%for20142015.160Thecourt
determinedthatarateof1.85%ofrevenueswithnoincreasewasappropriateforthe
entireperiod.Insoconcluding,thecourtrejectedASCAPsrelianceonthehigher
pricedlicensingagreementswiththemajorpublishers,concludingthatSony/ATVand
UMPGhadengagedinimpropernegotiationtactics,suchasdecliningtoprovidelistsof
theworksthepublishersrepresentedsothatPandoracouldremovethoseworksfromits
serviceintheeventofafailuretoreachagreement.161ThePandora decisionisaddressed
ingreaterdepthinPartIV.
SESAChasalsorecentlybeenthetargetofantitrustsuitsbylocaltelevisionstationsand
theRMLC,bothofwhichhaveaccusedSESACofengaginginanticompetitiveconduct
bytakingstepstomakeitsblanketlicensetheonlyviableoptionfortheseusers,suchas
byunreasonablyandsteeplyraisingthecostoftheperprogramlicenseandimposing
penaltiesonpublishersthatengageindirectlicensing.162InOctober2014,thelocal
televisionstationsandSESACagreedtoasettlementinwhichSESACagreedtopay
$58.5milliontothetelevisionstationsandtoprovideaperprogramlicenseinaddition
toablanketlicensebeginningJanuary1,2016.163TheRMLCsuitagainstSESACremains
pending.
c. Consent Decree Procedures

Asnoted,ASCAPandBMIarerequiredbytheirconsentdecreestograntanonexclusive
licensetopubliclyperformalloftheworksintheirrepertoirestoanypotentiallicensee
whomakesawrittenapplication.164Anentitythatseeksapublicperformancelicense
beginstheprocessbysubmittingsucharequesttothePRO.Intheabsenceofan
establishedratefortheapplicantsuse,thePROandtheapplicantmaythenengagein
In re Pandora,2013WL5211927,at*57;BMI,v. Pandora,2013WL6697788,at*34.
158
Pandora Ratesetting,6F.Supp.3dat32122.
159
Id.at354.
160
Id.at35761.
161
Meredith Corp., 1F.Supp.3dat19293;RMLC v. SESAC,29F.Supp.3dat49294.
162
MemorandumofLawinSupportofPlaintiffsUnopposedMotionforPreliminaryApprovalof
Settlementat12,5,Meredith Corp.,1F.Supp.3d180(No.09cv9177).TMLC,whichwasnota
partytothelitigation,wasalsoasignatorytothesettlement.Id.at1n.2.
163
164
ASCAPConsentDecree VI;BMIConsentDecree IV.A.
40
U.S.CopyrightOffice
negotiationsregardingtheappropriaterate.165Significantly,however,underboth
consentdecrees,themeresubmissionoftheapplicationgivestheapplicanttheright
immediatelytobeingusingthemusicalworksinthePROsrepertoireswithoutpayment
ofanyfeeorcompensationduringthependencyofnegotiationsoraratesetting
proceeding.166
IfthePROandlicenseeareunabletoagreeonafee,eitherpartymayapplyfora
determinationofareasonablefeebytheapplicableratecourt.167Thetermratecourtis
abitofamisnomer,however;asnotedabove,ratedisputesarehandledbythefederal
districtjudgeintheSouthernDistrictofNewYorkwhohasbeenassignedongoing
responsibilityforadministrationoftherelevantconsentdecree.168Currently,theASCAP
decreeandratesettingcasesareoverseenbyJudgeDeniseCote,andJudgeLouisL.
StantonoverseesthesematterswithrespecttoBMI.
Inaratecourtproceeding,thePROhastheburdenofprovingthattheroyaltyrateit
seeksisreasonable,andifthecourtdeterminesthattheproposedrateisnot
reasonable,itwilldetermineareasonablerateitself.169Indeterminingareasonablefee,
theratecourtistaskedwithassessingthefairmarketvalueofthelicense,i.e.,whata
licenseapplicantwouldpayinanarmslengthtransaction.170Butantitrustconcerns
alsoplayadirectrole:accordingtotheSecondCircuit,theratecourtsarealsoobligated
totak[e]intoaccountthefactthatthePRO,asamonopolist,exercisesdisproportionate
poweroverthemarketformusicrights.171
SincenegotiationsbetweenPROsandpotentiallicenseesaswellasratecourt
proceedingscanbelengthy,anapplicantoraPROmayapplytotheratecourttofixan
interimrate,pendingfinaldeterminationoftheapplicablerate.Underthetwodecrees,
suchinterimfeesaresupposedtobesetbythecourtwithinthreetofourmonths.172
Oncetheratecourtfixestheinterimrate,thelicenseemustpaytheinterimfee
ASCAPConsentDecreeIX.F;BMIConsentDecreeXIV.A.
165
ASCAPConsentDecree IX.E;BMIConsentDecree XIV.A.
166
ASCAPConsentDecree IX.A;BMIConsentDecreeXIV.A.
167
PaulFakler,Music Copyright Royalty RateSetting Litigation: Practice Before the Copyright Royalty
Board and How It Differs from ASCAP and BMI Rate Court Litigation,33THELICENSINGJ.1,5(2013),
available athttp://www.arentfox.com/sites/default/files/FaklerLicensingJournalArticle.pdf.
168
ASCAPConsentDecree IX.BD;BMIConsentDecreeXIV.A.
169
Pandora Ratesetting,6F.Supp.3dat353(citationomitted).
170
BMI v. DMX,683F.3dat45(internalquotationmarks,citations,andalterationsomitted).
171
Theinterimfeeproceedingsaretobecompletedwithin90daysinASCAPscaseand120days
inBMIscase.See ASCAPConsentDecreeIX(F);BMIConsentDecree XIV.B.
172
41
U.S.CopyrightOffice
retroactivelytothedateofitslicenseapplication.173Finalroyaltyratesarealsoapplied
retroactively.174
Significantly,section114(i)oftheCopyrightActprohibitstheratecourtfrom
consideringthelicensingfeespaidfordigitalperformancesofsoundrecordingsinits
ratesettingproceedingsforthepublicperformanceofmusicalworks.175Thisprovision
wasincludedwhenCongresscreatedapublicperformancerightforsoundrecordings
withthe1995enactmentoftheDPRSRA.176Intheory,itwasintendedtoprotect
royaltiesforthepublicperformanceofmusicalworksfrombeingdiminishedasaresult
ofthegrantofapublicperformancerightforsoundrecordingsindigitalcontexts.177
4. Statutory License for Public and Noncommercial

Broadcasting
Theactivitiesofpublicandnoncommercialeducationalbroadcastersaresubjecttoa
hodgepodgeofmusiclicensingprotocols.Section118providesastatutorylicensethat
coverssuchentitiespublicperformancesofmusicalworksandreproductionsand
distributionsthatenablesuchperformances.178Thesection118license,however,applies
onlytoovertheairbroadcasts.179Noncommercialbroadcastersmustcleardigital
performancerightsformusicalworks(e.g.,forinternetradio)withthePROsunderthe
provisionsoftheconsentdecreesasapplicable.180
Inaddition,thesection118licensedoesnotextendtotheuseofsoundrecordingsby
noncommercialbroadcasters.Forcertainreproduction,distribution,andderivative
rightsforsoundrecordings,noncommercialbroadcastersrelyontheexemptionin
section114(b),whichappliestomusicincludedineducationaltelevisionandradio
programs...distributedortransmittedthroughpublicbroadcastingentities.181The
See ASCAPConsentDecree IX(F);BMIConsentDecree XIV.B.
173
174
See ASCAPConsentDecreeIX(F);BMIConsentDecree XIV.B.
17U.S.C.114(i).
175
DPRSRA3.
176
BMIFirstNoticeCommentsat11.
177
17U.S.C.118(c).
178
17U.S.C.118(c)(1),(f)(limitingperformancelicensetononcommercialeducational
broadcaststation[s]asdefinedin47U.S.C.397);47U.S.C.397(definingnoncommercial
educationalbroadcaststationasatelevisionorradiobroadcaststation);see alsoNRBMLCFirst
NoticeCommentsat14(describingsection118licenseasbeingconfinedtoovertheair
transmissions).
179
See id.at1415(explainingthatfordigitaltransmissionofmusicalworks...noncommercial
broadcastersarerequiredtonegotiatewithASCAP,BMI,andSESAC).
180
17U.S.C.114(b).
181
42
U.S.CopyrightOffice
114(b)exemptiondoesnotapplytodigitalperformancesandrelatedreproductions,
however.182Forthoseuses,noncommercialbroadcastersmustobtainsection112and
114statutorylicenses(discussedbelow).183
C. Licensing Sound Recordings

1. Exclusive Rights in Sound Recordings
TheownerofasoundrecordingfixedafterFebruary15,1972possessesanumberof
exclusiverightsundertheCopyrightAct,includingtherighttomakeanddistribute
copiesorphonorecords(e.g.,CDsandDPDs)ofthework;184therighttocreatederivative
works(e.g.,anewworkbasedonanexistingrecording);185andtherighttoperformthe
workpubliclybymeansofadigitalaudiotransmission(e.g.,viainternetorsatellite
radio).186TheActexemptspublicperformancesofsoundrecordingsbyterrestrialradio
stations.187
2. Reproduction and Distribution Rights

Exceptinthelimitedcaseofnoninteractivestreamingservicesthatqualifyfor
compulsorylicensingundersections112and114,licensestoreproduceanddistribute
soundrecordingssuchasthosenecessarytomakeanddistributeCDs,transmitDPDs
andringtones,oroperateaninteractivemusicserviceareobtainedthroughdirect
negotiationbetweenalicenseeandthesoundrecordingowner(usuallyarecordlabel)in
theopenmarket.188
3. Public Performance Rights

a. Lack of Terrestrial Performance Right
Inthe1995DPRSRA,Congressgavesoundrecordingownersanexclusivepublic
performanceright,butonelimitedtodigitalaudiotransmissions,andcreatedthe
NPRFirstNoticeCommentsat45.Section114(b)extendstoeducationaltelevisionandradio
programs.17U.S.C.114(b).(Notethatsection114(b)defineseducationaltelevisionand
radioprogramsbyreferencing47U.S.C.397,butCongressdeletedthatdefinitionfromsection
397in1978withoutchangingsection114(b).See47U.S.C.397note.Atthetimeof114(b)s
enactmentin1976,thetermwasdefinedinsection397asprogramswhichareprimarily
designedforeducationalorculturalpurposes.).
182
183
NRBMLCFirstNoticeCommentsat23;NPRFirstNoticeCommentsat34.
184
17U.S.C.106(1),(3).
185
17U.S.C.106(2).
186
17U.S.C.106(6).
187
17U.S.C.114(d)(1).
188
SeeDiMAFirstNoticeCommentsat8.
43
U.S.CopyrightOffice
section112and114statutorylicensestocoversatelliteradioandnoninteractive
subscriptionprovidersengagedindigitalperformances.189In1998,Congressextended
thecompulsorylicenseprovisionstoincludesubscriptioninternetradioservices.190It
alsoexpandedtheexemptionforephemeralcopiesforovertheairbroadcastsand
createdthesection112(e)statutorylicense.191Traditionalovertheairbroadcasts,
however,areexpresslyexemptedfromthesoundrecordingperformanceright.192
Congressdrewthislegaldistinctionbasedonperceiveddifferencesbetweendigitaland
traditionalservices,believingatthetimethattraditionalbroadcastersposednothreat
totherecordingindustry,incontrasttodigitaltransmissionservices.193Alongstanding
justificationforthelackofasoundrecordingperformancerighthasbeenthe
promotionaleffectthattraditionalairplayissaidtohaveonthesaleofsound
recordings.194Inthetraditionalviewofthemarket,broadcastersandlabelsrepresenting
copyrightownersenjoyamutuallybeneficialrelationshipwherebyterrestrialradio
stationsexploitsoundrecordingstoattractthelistenerpoolsthatgenerateadvertising
dollars,and,inreturn,soundrecordingownersreceiveexposurethatpromotesrecord
andothersales.195
AsdiscussedinSectionIII,apartfromthefactthatsoundrecordingshelpgenerate
billionsofdollarsannuallyforterrestrialradiostations,therearesignificantquestionsas
towhetherthetraditionalviewofthemarketevenifpersuasiveinearliertimes
remainscredibletoday.Notably,in2014,with298millionactivelisteners,terrestrial
radiohadmorethandoublethetotalofPandora(79million),SiriusXM(27million)
andSpotify(14million)combined.196
See generally DPRSRA.
189
DigitalMillenniumCopyrightAct(DMCA),Pub.L.No.105304,405(a),112Stat.2860,
28902899(1998).
190
191
Id.402,405(b).
192
See17U.S.C.114(d)(1).
See S.REP.NO.104128,at1415(ItistheCommitteesintenttoprovidecopyrightholdersof
soundrecordingswiththeabilitytocontrolthedistributionoftheirproductbydigital
transmissions,withouthamperingthearrivalofnewtechnologies,andwithoutimposingnew
andunreasonableburdensonradioandtelevisionbroadcasters,whichoftenpromote,and
appeartoposenothreatto,thedistributionofsoundrecordings.).
193
Id.
194
SeeU.S.GOVTACCOUNTABILITYOFFICE,GAO10862,TELECOMMUNICATIONS:THEPROPOSED
PERFORMANCERIGHTSACTWOULDRESULTINADDITIONALCOSTSFORBROADCASTRADIOSTATIONS
ANDADDITIONALREVENUEFORRECORDCOMPANIES,MUSICIANS,ANDPERFORMERS1321(2010),
available at http://www.gao.gov/assets/310/308569.pdf(GAOREPORT).
195
ZachOMalley,Truth in Numbers: Six Music Industry Takeaways From YearEnd Data,FORBES

(Jan.22,2015),available at http://www.forbes.com/sites/zackomalleygreenburg/2015/01/22/truth
196
44
U.S.CopyrightOffice
Internationally,theUnitedStatesisanoutlier.Virtuallyallindustrializednations
recognizeamorecompletepublicperformancerightforsoundrecordingsthandoesthe
UnitedStates.197ThefailureofU.S.lawtodothesamecausesU.S.recordcompanies
andartiststoforgoanestimated$70100millioninroyaltiesforforeignexploitationsof
theirworksduetothelackofreciprocity.198
Significantly,however,inrecentyears,thenationslargestbroadcastcompany,
iHeartMedia(formerlyClearChannel),hasenteredintolicensingagreementswith
WMGandanumberofindependentrecordlabels(includingBigMachineRecords,the
recordlabelofTaylorSwift,RascalFlats,andTimMcGraw)coveringbothterrestrialand
internetradio.199WhilethecurrentCRBrateforstreamedradioisaperplayrate,these
arrangementsapparentlyfeatureapercentagebasedorotheralternativeratestructure
forbothdigitalandterrestrialuses.200Althoughthetermsofthesedealsremainprivate,
reportsindicatethatiHeartMediaagreedtopaythesmallerlabelsbasedonanindustry
rateof1%ofadvertisingrevenuesforterrestrialuses,andperhapsalargersumto
WMG.201
Inrecentyearstherehavealsobeenvariouslegislativeeffortstoprovideforamore
completepublicperformanceright,202aswellasnumerouscongressionalhearings
focusedonexpandingtherighttocovertraditionalbroadcasttransmissions.203The
innumberssixmusicindustrytakeawaysfromyearenddata/ (notinglivemusiccomprises26%
andsatelliteradiosubscription10%).
OnlyahandfulofcountriescountriesincludingIranandNorthKorealacksucharight,in
additiontotheUnitedStates.See, e.g, A2IMFirstNoticeCommentsat8;SoundExchangeFirst
NoticeCommentsat17.
197
GAOREPORTat30(estimatesbasedonlanguageofthePerformanceRightsAct,S.379,111th
Cong.(2009)).TheNABdisputesthesefigures.NABFirstNoticecommentsat2930&n.15.
198
SeeEdChristman,Heres Why Warner Musics Deal with Clear Channel Could be Groundbreaking
for the Future of the U.S. Music Biz (Analysis), BILLBOARD(Sept.12,2013),http://
www.billboard.com/biz/articles/news/5694973/hereswhywarnermusicsdealwithclear
channelcouldbegroundbreaking.
199
200
Id.
Id.;see alsoBenSisario,Clear ChannelWarner Music Deal Rewrites the Rules on Royalties,N.Y.

TIMES(Sept.12,2013),http://www.nytimes.com/2013/09/13/business/media/clearchannel
warnermusicdealrewritestherulesonroyalties.html.
201
See,e.g.,PerformanceRightsAct,H.R.848,S.379,111thCong.(2009);PerformanceRightsAct,
H.R.4789,S.2500,110thCong.(2010);FreeMarketRoyaltyAct,H.R.3219,113thCong.(2013).
202
See,e.g.,Internet Streaming of Radio Broadcasts: Balancing the Interests of Sound Recording Copyright
Owners with Those of Broadcasters: Hearing Before the Subcomm. on Courts, the Internet, and Intell.
Prop. of the H. Comm. on the Judiciary,108thCong.(2004)(Internet Streaming of Radio Hearing);
Music Licensing Hearings.
203
45
U.S.CopyrightOffice
CopyrightOfficehaslongsupported,andcontinuestosupport,thecreationofamore
completesoundrecordingperformanceright.204
b. Section 112 and 114 Licenses

Thesection114statutorylicenseallowsdifferenttypesofnoninteractivedigitalmusic
servicesfreeandpaidinternetradioservices,205preexistingsatelliteradioservices,206
andpreexistingmusicsubscriptionservices207toperformsoundrecordingsupon
compliancewiththestatutorylicenserequirements,includingthepaymentofroyalties
asdeterminedbytheCRB.208Inaddition,recognizingthatsuchdigitalservicesmust
makeserverreproductionsofsoundrecordingssometimescalledephemeral
copiestofacilitatetheirdigitaltransmissions,Congressestablishedarelatedstatutory
licenseundersection112toauthorizethecreationofthesecopies.209Ratesandtermsfor
thesection112licensearealsoestablishedbytheCRB.
Thesection112and114licensesforsoundrecordingsaresubjecttoanumberof
technicallimitations.Forinstance,servicesrelyingonthesection114statutorylicense
areprohibitedfrompublishinganadvanceprogramscheduleorotherwiseannouncing
See,e.g.,The Performance Rights Act and Parity Among Music Delivery Platforms: Hearing Before the
S. Comm. on the Judiciary,111thCong.11718(2009)(Performance Rights Act Hearing)(statement
ofMarybethPeters,RegisterofCopyrights);Ensuring Artists Fair Compensation: Updating the
Performance Right and Platform Parity for the 21st Century: Hearing Before the Subcomm. on Courts, the
Internet, & Intellectual Prop. of the H. Comm. on the Judiciary,111thCong.1330(2007)(Ensuring
Artists Fair Compensation Hearing)(statementofMarybethPeters,RegisterofCopyrights);
Internet Streaming of Radio Hearingat822(statementofDavidO.Carson,GeneralCounsel,U.S.
CopyrightOffice);U.S.COPYRIGHTOFFICE,PERFORMANCERIGHTSINSOUNDRECORDINGS(Comm.
Print1978),available at http://copyright.gov/reports/performancerightssoundrecordings.pdf
(PERFORMANCERIGHTSREPORT).
204
Freenoninteractiveinternetradioservicesnotexemptunder17U.S.C.114(d)(1)qualifyas
eligiblenonsubscriptionservicesandpaidnoninteractiveinternetradioservicesqualifyas
newsubscriptionservicesintheparlanceofsection112and114.See 17U.S.C.114(j)(6),(8).
205
Apreexistingsatellitedigitalaudioradioserviceisasubscriptionsatelliteaudioradioservice
providedpursuanttoasatellitedigitalaudioradioservicelicenseissuedbytheFCConorbefore
July31,1998.17U.S.C.114(j)(10).Currently,thereisonlyonesatelliteservice,SiriusXM.See
DeterminationofRatesandTermsforPreexistingSubscriptionServicesandSatelliteDigital
AudioRadioServices,78Fed.Reg.23,054,23,055(Apr.17,2013)(PSS/SatelliteII).
206
Apreexistingsubscriptionserviceisanoninteractiveaudioonlyservicethatwasinexistence
onorbeforeJuly31,1998.U.S.C.114(j)(11).MusicChoicewhichtransmitsmusicviacable
andsatellitetelevisionandtheinternetisanexampleofapreexistingsubscriptionservice.
PSS/SatelliteII,78Fed.Reg.at23,055n.5.
207
17U.S.C.114(d)(2).
208
DMCA402;17U.S.C.112(e)(1);H.R.REP.NO.105796,at89(1998)(Conf.Rep.).
209
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U.S.CopyrightOffice
oridentifyinginadvancewhenaspecificsong,albumorartistwillbeplayed.210
Anotherexampleisthesoundrecordingperformancecomplement,whichlimitsthe
numbertracksfromasinglealbumorbyaparticularartistthatmaybeplayedduringa
3hourperiod.211
Paymentandreportingofroyaltiesunderthesection112and114licensesaremadetoa
singlenonprofitagent:SoundExchange.212SoundExchangewasestablishedbythe
RIAAin2000andin2003wasspunoffasanindependententity.213TheCopyrightAct
specifieshowroyaltiescollectedundersection114aretobedistributed:50%goestothe
copyrightownerofthesoundrecording,typicallyarecordlabel;45%goestothe
featuredrecordingartistorartists;2%goestoanagentrepresentingnonfeatured
musicianswhoperformonsoundrecordings;and2%toanagentrepresenting
nonfeaturedvocalistswhoperformonsoundrecordings.214Section112feesarepaidby
SoundExchangedirectlytothesoundrecordingowner.215Priortodistributingroyalty
payments,SoundExchangedeductsthereasonablecostsincurredincarryingoutits
responsibilities.216
Notably,theActdoesnotincluderecordproducersinthestatutorilydefinedroyalty
split.Asaresult,recordproducersmustrelyoncontractswithoneoftheparties
specifiedinthestatute,oftenthefeaturedrecordingartist,inordertoreceiveroyalties
fromdigitalperformances.217Tohelpfacilitatethesecontracts,SoundExchangehas
See 17U.S.C.114(d)(2)(B)(C).
210
17U.S.C.114(d)(2)(B)(i),(d)(2)(C)(i),(j)(13).
211
37C.F.R.380.11(Collectiveisthecollectionanddistributionorganizationthatisdesignated
bytheCopyrightRoyaltyJudges.Forthe20112015licenseperiod,theCollectiveis
SoundExchange,Inc.);see alsoIntercollegiate Broad. Sys., Inc.v.Copyright Royalty Bd.,571F.3d69,
91(D.C.Cir.2009).
212
Technology Briefing: Internet; Online Royalty Pool Created,N.Y.TIMES,Nov.29,2000,atC4; Global
Business Briefs,WALLST.J.,Oct.2,2003,atB5.
213
17U.S.C.114(g)(2); see About Digital Royalties,SOUNDEXCHANGE,

http://www.soundexchange.com/artistcopyrightowner/digitalroyalties/(lastvisitedJan.26,
2015).Royaltiescollectedpursuanttosection112arenotdistributedaccordingtothissplit,and
insteadarepaidentirelytotherecordlabels.ReviewofCopyrightRoyaltyJudges
Determination,73Fed.Reg.9143,9146(Feb.19,2008).
214
17U.S.C.112(e);see also ReviewofCopyrightRoyaltyJudgesDetermination,73Fed.Reg.

9143,9146(Feb.19,2008)(explainingthat[r]oyaltiescollectedundersection114arepaidtothe
performersandthecopyrightownersofthesoundrecordings...whereas,theroyaltiescollected
pursuanttothesection112licensearenotpaidtoperformers).
215
216
17U.S.C.114(g)(3).
See 17U.S.C.114(g)(2);About Digital Royalties,SOUNDEXCHANGE,http://www.

soundexchange.com/artistcopyrightowner/digitalroyalties/(lastvisitedJan.26,2015); see also
217
47
U.S.CopyrightOffice
begunprocessingdirectpaymentstoproducersbaseduponwrittendirectionfromthe
featuredartist.218
SinceSoundExchangebecameanindependententityin2003,ithasdistributedover$2
billiontoartistsandlabels.219Thecollectiveengagesinoutreachtoidentifyandlocate
artistsandlabelswhomaybedueroyaltiesfromthefundsthatishascollected.220
Nonetheless,significantamountsofunclaimedfundshaveaccumulatedovertime.221
PressaccountsindicatethatSoundExchangehadunclaimedroyaltiesofapproximately
$96millionasoftheendof2013.222Undertheapplicableregulations,SoundExchange
retainsallundistributedroyaltiesfornotlessthanthreeyears,andthereaftermay
releasethemtooffsetitsadministrativecostsand/ortoengageinratesettingand
enforcementactivities.223
Interactive/Noninteractive Distinction
Thestatutorylicensingframeworkappliesonlytononinteractive(i.e.,radiostyle)
services;interactiveorondemandservicesarenotcovered.224Thedistinctionbetween
interactiveandnoninteractiveserviceshasbeenthematterofsomedebate.Thestatute
providesthataninteractiveserviceisonethatenablesamemberofthepublictoreceive
eitheratransmissionofaprogramspeciallycreatedfortherecipient,oronrequest,a
transmissionofaparticularsoundrecording,whetherornotaspartofaprogram,which
isselectedbyoronbehalfoftherecipient.225
Thestatutorydefinitionleadstothequestionwhethersocalledpersonalizedor
custommusicstreamingservicesservicesthattailorthemusictheyplayto
individualuserpreferencestransmitprogramsthatarespeciallycreatedforthe
Music Licensing Hearingsat14(statementofNeilPortnow,President/CEOofTheRecording
Academy).
218
Our Work,SOUNDEXCHANGE,http://www.soundexchange.com/about/ourwork/(lastvisited
Jan.26,2015).
219
SoundExchange Outreach Efforts,SOUND EXCHANGE,http://www.soundexchange.com/wp

content/uploads/2014/11/OutreachFactSheet_11.5.14.pdf(lastvisitedJan.26,2015).
220
SeeGlennPeoples,SoundExchange Financials Show Fewer Unclaimed Royalties, Persistent Data
Problems,BILLBOARD(Dec.24,2014),http://www.billboard.com/articles/business/6415147/
soundexchangefewerunclaimedroyaltiesdataproblems.
221
222
Id.
223
See, e.g.,37C.F.R.380.8,380.17,380.27.
See17U.S.C.112(e),114(d)(2)(3),(f).Thedistinctionbetweeninteractiveand
noninteractiveserviceshasbeenthematterofsomedebate,andisaddressed infra.
224
225
17U.S.C.114(j)(7).
48
U.S.CopyrightOffice
recipient.InArista Records LLC v. Launch Media, Inc. (Launch Media),theSecond

Circuitheldthatonesuchservicethatplayedsongsforusersbasedonusersindividual
ratingswasnotinteractivebecausetheservicedidnotdisplacemusicsales.226Following
theLaunch Mediadecision,personalizedmusicstreamingservicessuchasPandoraand
Rdioobtainstatutorylicensesasnoninteractiveservicesfortheirpublicperformanceof
soundrecordings.TheCRBestablishedratesdonotcurrentlydistinguishbetweensuch
customizedservicesandotherservicesthatsimplytransmitundifferentiated,radiostyle
programmingovertheinternet.
Ratesetting Standards
Notably,undersection114,theratestandardapplicabletopreexistingsatelliteradio
andmusicsubscriptionservices(i.e.,thoseservicesthatexistedasofJuly31,1998)
differsfromthatforotherservicessuchasinternetradioandnewersubscription
services.227Thisdistinctionisalegislativeartifact.Thesection114statutorylicensewas
firstcreatedwiththeenactmentoftheDPRSRAin1995,andatthetimeitappliedonly
tosatelliteradioandsubscriptionmusicservices.Royaltyratesandtermsunderthe
morelimited1995licenseweregovernedbythefourfactorpolicyorientedstandardin
section801(b)(1)oftheActthatis,thesamestandardthathadlongappliedtothe
section115licenseformusicalworks.228WiththeenactmentoftheDMCAin1998,
Congressexpandedthesection114licensetoincludeinternetradio,createdanew
statutorylicenseforassociatedephemeralrecordingsinsection112,andcreatedanew
ratesettingstandardthewillingbuyer/willingsellerstandard.Congress,however,
grandfatheredpreexistingservices(i.e.,thosethatexistedbeforetheDMCAsenactment)
undertheoldroyaltyratesettingstandard.
Accordingly,becauseofthestaggeredenactmentofthesection112and114licenses,
royaltyratesforalimitedsetofolderservicesSiriusXM,astheonlypreexisting
satelliteservice,andMusicChoiceandMuzak,astheonlypreexistingsubscription
servicesaregovernedbythefourfactorstandardinsection801(b)oftheAct.229
Meanwhile,forallinternetradioandothernewerdigitalmusicservices,andforall
ephemeralrecordingsregardlessoftheservice,theCRBistoestablishratesandterms
thatmostclearlyrepresenttheratesandtermsthatwouldhavebeennegotiatedinthe
marketplacebetweenawillingbuyerandawillingseller.230AsexplainedinSectionIII,
thecontinuingproprietyofthatdisparityisamatterofdisputeamongstakeholders.
Launch Media,578F.3d148,161,16364(2dCir.2009).
226
17U.S.C.114(j)(10),(11);seePSS/SatelliteII,78Fed.Reg.at23,055.
227
See17U.S.C.114(f)(1),115(c)(3),801(b)(1).
228
See17U.S.C.114(f)(1),801(b)(1);PSS/SatelliteII,78Fed.Reg.at23,055&n.5.
229
17U.S.C.114(f)(2)(B).TheprovisionfurtherrequirestheCRBtoconsiderwhetheruseof
theservicemaysubstituteforormaypromotethesalesofphonorecordsorotherwisemay
230
49
U.S.CopyrightOffice
CRB Ratesetting Proceedings

Thestatutoryratesthatapplyunderthesection112,114and115licensesareestablished
bytheCRB.231CRBratesettingproceedingsforthesection112,114,and115licensestake
placeatfiveyearintervals,andthetimingoftheseproceedingsissetbystatute.232
TheCRBiscomposedofthreejudges,andCongressimposedstrictqualificationsfor
thesepositions.EachCRBjudgeisrequiredtohaveatleastsevenyearsoflegal
experience.233Thechiefcopyrightroyaltyjudgemusthaveaminimumoffiveyearsof
experienceinadjudications,arbitrations,orcourttrials.Asfortheothertwojudges,one
musthavesignificantknowledgeofcopyrightlawandtheothermusthavesignificant
knowledgeofeconomics.234TheRegisterofCopyrightsalsoplaysaroleinratesetting,in
thatsheisresponsibleforreviewingtheCRBsdeterminationstoensuretheyarefree
frommateriallegalerror,andmayalsobecalledupontoaddressmaterialquestionsof
substantivelawthatimpacttheproceedings.235Finalratesettingdeterminationsare
appealabletotheUnitedStatesCourtofAppealsfortheDistrictofColumbiaCircuit.236
Congressintendedtheratesettingprocesstopermitvoluntaryindustryagreements
whenpossible.237Forexample,Congressprovidedantitrustexemptionstostatutory
licenseesandcopyrightownersofsoundrecordings,sothattheycoulddesignate
commonagentstocollectivelynegotiateandagreeuponroyaltyrates.238Thestatutealso
allowsforsettlementofratesettingdisputes,andmandatesathreemonthvoluntary
negotiationperiodatthestartofeachproceedingbeforethepartiessubmittheir
cases.239Ifasettlementisreachedamongsomeoralloftheparticipatingparties,theAct
interferewithormayenhancethesoundrecordingcopyrightownersotherstreamsofrevenue
fromitssoundrecordings,andtherelativerolesofthecopyrightownerandthetransmitting
entityinthecopyrightedworkandtheservicemadeavailabletothepublicwithrespectto
relativecreativecontribution,technologicalcontribution,capitalinvestment,cost,andrisk.Id.

17U.S.C.801(b)(1).
231
17U.S.C.804(b).
232
17U.S.C.802(a).
233
17U.S.C.802(a).
234
H.R.REP.NO.108408,at26(2004) reprinted in2004U.S.C.C.A.N.2,332,2,341;17U.S.C.
802(f)(1).
235
17U.S.C.803(d)(1).
236
H.R.REP.NO.108408,at24.
237
17U.S.C.112(e)(2),114(e)(1),115(c)(3)(B)(Theseantitrustexemptionsarelimitedto
negotiationsaddressingrightswithinthescopeofthestatutorylicensesinsections112,114,and
115).
238
See17U.S.C.803(b)(1)(3).
239
50
U.S.CopyrightOffice
empowerstheCRBtoadoptthatsettlementasabasisforstatutorytermsandrates
thatwillapplytoallpartiesunderthestatutorylicense.240Notably,however,theAct
doesnotrequire theCRBtoimmediatelyactonsuchsettlements.Inthepast,theCRB
hasdeferredtheadoptionofpartialsettlementsuntiltheendofthefullratesetting
proceeding.241
Absentasettlement,theCRBmustproceedtodeterminetheratesandtermsofthe
statutorylicense.AlthoughtheCRBhassomeflexibilityinorganizingitsprocedures,
manyaspectsofitsproceedingsaredictatedbythestatute.242Inmanyinstances,these
proceduresdepartfrompracticesusedinordinarycivillitigation.Forinstance,
participatingpartiesmustfiletheirwrittendirectcasesinsupportoftheirrequested
ratesincludingwitnesstestimonyandsupportingexhibitsbeforeanydiscoveryhas
beentaken.243Additionally,thestatuterequiresseparatedirectandrebuttalphasesof
ratesettinghearings,effectivelyresultingintwotrials.244Theseprocedurescannotbe
alteredbytheCRBevenuponstipulationoftheparties.
Royalty Rates
Ingeneral,theCRB(liketheCARPbeforeit)hasadoptedperperformanceratesfor
internetradio,ratherthanthepercentageofrevenueratesthataretypicalinPRO
licenses.245Thatperstreamapproachhasprovencontroversial.AftertheCRBs
WebcastingIIdecisionin2007,anumberofinternetradioservicesandbroadcasters
complainedthattheperperformancerateswereunsustainable.Theseconcernsled
CongresstopasslegislationgivingSoundExchangetheauthoritytonegotiateandagree
toalternativeroyaltyschemesthatcouldbebindingonallcopyrightownersandothers
17U.S.C.801(b)(7).
240
SeeSoundExchangeFirstNoticeCommentsat89;see alsoDigitalPerformanceRightinSound
RecordingsandEphemeralRecordings,76Fed.Reg.13,026,13,027(Mar.9,2011)(adopting
partialsettlemententeredintoinJune2009asbasisforfinalratesandtermsforcommercial
webcasters).
241
242
See17U.S.C.803(b)(6).
243
17U.S.C.803(b)(6).
244
17U.S.C.803(b)(6)(C).
See, e.g., 37C.F.R.380.3(a)(1);see alsoDeterminationofReasonableRatesandTermsforthe

DigitalPerformanceofSoundRecordingsandEphemeralRecordings,67Fed.Reg.45,240,45,272
(July8,2002).Section112rateshavebeenarelativelyinsignificantpartoftheCRBsratesetting
proceedings,andhavebeenestablishedasamodestpercentageofthe114rate.See e.g.,37C.F.R.
385.3(c)(establishingephemeralrecordingratetobe5%ofthetotalroyaltiespaidunderthe
section112and114licenses).
245
51
U.S.CopyrightOffice
entitledtoroyaltypaymentsinlieuoftheCRBsetrates.246Similarcomplaintsafterthe
CARPs1998webcastingdecisionledCongresstoenactanalogouslegislationin2002.247
InthewakeofCongressactions,SoundExchangereachedagreementwithanumberof
internetradioservices,ingeneraladoptingroyaltyratesthatweremorecloselyaligned
withtheservicesrevenues.Forexample,in2009,SoundExchangenegotiatedrateswith
largecommercialpureplayinternetradioservices(i.e.,serviceslikePandorathatonly
transmitovertheinternet).248Underthatagreement,thoseservicesagreedtopaythe
greaterof25%ofgrossrevenuesorspecifiedperperformancerates.249
c. Privately Negotiated Licenses

Astreamingservicethatdoesnotfallunderthesection112and114licensesi.e., an
interactiveservicemustnegotiatealicensewitharecordcompanyinordertousethe
labelssoundrecordings.250Sincedirectlicensesareagreeduponatthediscretionofthe
copyrightownerandthepotentiallicensee,thelicensetermscanbevastlydifferentfrom
thosethatapplyunderthestatutoryregime.Itiscommonforamusicserviceseekinga
soundrecordinglicensefromalabeltopayasubstantialadvanceagainstfuture
royalties,andsometimesanadministrativefee.251Othertypesofconsiderationmayalso
beinvolved.Forexample,themajorlabelsacquiredareportedcombined18%equity
stakeintheondemandstreamingserviceSpotifyallegedlybased,atleastinpart,on
theirwillingnesstograntSpotifyrightstousetheirsoundrecordingsonitsservice.252
See WebcasterSettlementActof2008,Pub.L.No.110435,122Stat.4974.Congresslater
extendedthetimeframefornegotiations.SeeWebcasterSettlementActof2009,Pub.L.No.111
36,123Stat.1926;see alsoTerryHart,A Brief History of Webcaster Royalties,COPYHYPE(Nov.29,
2012),http://www.copyhype.com/2012/11/abriefhistoryofwebcasterroyalties.
246
SmallWebcasterSettlementActof2002,Pub.L.No.107321,116Stat.2780.
247
NotificationofAgreementsUndertheWebcasterSettlementActof2009,74Fed.Reg.34,796,
34,797(July17,2009);BrianT.Yeh,Statutory Royalty Rates for Digital Performance of Sound
Recordings: Decision of the Copyright Royalty Board,inMUSICLICENSINGRIGHTSANDROYALTYISSUES
35,49(ThomasO.Tremblayed.,2011).
248
NotificationofAgreementsUndertheWebcasterSettlementActof2009,74Fed.Reg.at34,799
800;KOHNat1498.
249
250
17U.S.C.114(d)(3)(C).
A2IMSecondNoticeCommentsat56;ResnickSecondNoticeCommentsat23;see also
HannahKarp,Artists Press for Their Share,WALLST.J.(July21,2014),http://online.wsj.com
/news/articles/SB20001424052702303833804580023700490515416(reportingthatWarnerMusic
GroupreceivedanadvancefromGoogleofover$400million).
251
SeeHelienneLindvall,Behind the Music: The Real Reason Why the Major Labels Love Spotify,
GUARDIAN(Aug.17,2009),http://www.theguardian.com/music/musicblog/2009/aug/17/major
labelsspotify.
252
52
U.S.CopyrightOffice
4. Pre1972 Sound Recordings

WhenCongressactedin1971tograntfederalcopyrightprotectiontosoundrecordings,
itextendedfederalprotectionprospectively,torecordingscreatedonorafterFebruary
15,1972.253SoundrecordingsfixedbeforeFebruary15,1972areprotectedbya
patchworkofdifferingstatelaws.254
Thedisparatetreatmentofpre1972soundrecordingsunderfederalversusstatelawhas
givenrisetoanumberofsignificantpolicyconcerns,includingissuesaboutthe
preservationanduseofolderrecordingswithoutthebenefitoffederallyrecognized
limitationsoncopyrightownersexclusiverights.255Theseissueswereextensively
addressedina2011CopyrightOfficereportonpotentialfederalizationofcopyrightfor
pre1972recordings.256
Initsreport,theOfficesurveyedstatelawsanddeterminedthattheprotectionsthat
statelawprovidesforpre1972soundrecordingsareinconsistentandsometimesvague
anddifficulttodiscern.257Inaddition,theOfficesreportconcludedthatstatelawdid
notprovideadequateprotectionforusesthatwouldbeconsideredfairusesunder
federallaw.258TheOfficethereforerecommendedthatpre1972recordingsbebrought
withinthefederalcopyrightsystem,whichwouldofferuniformprotectiontotheir
ownersaswellasappropriateexceptionsandlimitationsforthebenefitofusers.
SincetheOfficesreportwasreleased,therehavebeensomenotabledevelopmentsin
thisarea.Asignificantquestionhasarisenconcerningwhetherstatelawprotection
extendstothepublicperformanceofpre1972recordings.259Inthecontextoftheir
negotiateddealswithrecordlabels,somemajorservices,includingYouTubeand
Spotify,obtainlicensesthatcovertheuseincludingtheperformanceofpre1972
SoundRecordingActof1971,85Stat.at392.
253
TheCopyrightActexpresslypermitsstatestocontinuestatelawprotectionforpre1972sound
recordingsuntilFebruary15,2067,atwhichtimeallstateprotectionwillbepreemptedbyfederal
lawandpre1972soundrecordingswillenterthepublicdomain.17U.S.C.301(c).Thereis,
however,asignificantclassofpre1972soundrecordingsthatdoenjoyfederalcopyright
protectionsoundrecordingsofforeignoriginforwhichcopyrightprotectionwasrestoredas
partoftheUruguayRoundAgreementsActin1994.SeeP RE1972SOUNDRECORDINGSREPORT
at1720.
254
255
SeePRE1972SOUND RECORDINGSREPORTat6470.
See generally id.
256
Id.at48.
257
Id.at8687.
258
Ina1977reportonpublicperformancerightsinsoundrecordings,theCopyrightOffice
recognizedthatCongresshadleftthedecisionwhetherornottorecognizeaperformanceright
forpre1972soundrecordingstothestates.PERFORMANCERIGHTSREPORTat18.
259
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U.S.CopyrightOffice
soundrecordings.260Someservicesthatusethesection112and114statutorylicenses,
suchasMusicChoice,261makepaymentstoSoundExchangeforuseofpre1972works
pursuanttothesamestatutoryratesandtermsapplicableundersections112and114.262
Others,includingSiriusXMandSpotify,donotpayroyaltieseithertocopyrightowners
directlyortoSoundExchangeforperformancesofpre1972soundrecordings.263
Recently,threecourtstwoinCaliforniaandoneinNewYorkhaveheldthatthe
unauthorizedpublicperformanceofpre1972soundrecordingsviolatesapplicablestate
law.Intheinitialcase,aCaliforniafederaldistrictcourtruledthatSiriusXMinfringed
rightsguaranteedtoplaintiffsbystatestatute.264AstatecourtinCalifornia
subsequentlyadoptedthefederalcourtsreadingoftheCaliforniastatuteinasecond
actionagainstSiriusXM.265Followingthesedecisions,inathirdcaseagainstSiriusXM,
afederaldistrictcourtinNewYorkhasindicatedthatthepublicperformanceofpre
1972soundrecordingsconstitutescommonlawcopyrightinfringementandunfair
competitionunderNewYorklaw.266Notably,thereasoningemployedinthesedecisions
isnotexpresslylimitedtodigitalperformances(i.e.,internetstreamingandsatellite
radio);theythuscouldhavepotentiallybroadimplicationsforterrestrialradio
(currentlyexemptunderfederallawforthepublicperformanceofsoundrecordings)as
well.Inthemeantime,similarlawsuitshavebeenfiledagainstotherdigitalproviders,
Tr.at161:1821(June5,2014)(ScottSellwood,Google/YouTube);Tr.at152:0409(June5,2014)
(StevenMarks,RIAA).
260
MusicChoiceFirstNoticeCommentsat15;Tr.at190:0818(June24,2014)(PaulFakler,Music
Choice).
261
PRE1972SOUND RECORDINGSREPORTat45n.196;but see PSS/SatelliteII,78Fed.Reg.at23,073

(indicatingpre1972soundrecordingsarenotcoveredbysection112and114licenses).
262
See HannahKarp,Turtles and Sirius XM: Not Happy Together,WALLST.J.(Aug.3,2013),

http://blogs.wsj.com/speakeasy/2013/08/03/turtlesandsiriusxmnothappytogether.Previously,
SiriusXMdidincludepre1972recordingsinitsroyaltyaccountinglogstoSoundExchange,
whichwerenonitemized,butstoppedin2011afterSoundExchangeaskedSiriusXMtostart
reportingexactlywhatitwaspayingfor.See HannahKarp,Sirius Is Sued Over Music Royalties for
Pre1972 Recordings,W ALLST.J.(Aug.26,2013),http://www.wsj.com/articles/
SB10001424127887324591204579037260890310376.
263
See Flo & Eddie Inc. v. Sirius XM (Flo & Eddie v. Sirius XM CA),No.13cv5693,2014U.S.Dist.
LEXIS139053,at*2223(C.D.Cal.Sept.22,2014).
264
Capitol Records, LLC v. Sirius XM,No.BC520981(Cal.Super.Ct.Oct.14,2014)(orderregarding
juryinstructions),available at http://www.project72.org/documents/SiriusXMOrderGranting
JuryMot.pdf.
265
See Flo & Eddie Inc. v. Sirius XM (Flo & Eddie v. Sirius XM NY),No.13cv5784,2014U.S.Dist.
LEXIS166492,at*4044,*5052(S.D.N.Y.Nov.14,2014)(denyingSiriusXMsmotionfor
summaryjudgment,andaskingSiriusXMtoshowcausewhyjudgmentshouldnotbeentered
onbehalfofplaintiffs),reconsideration denied,2014U.S.Dist.LEXIS174907(Dec.12,2014).
266
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U.S.CopyrightOffice
includingPandora,Google,ApplesBeatsservice,andRdio,allegingtheunauthorized
useofpre1972recordings.267
AnotherissuethathasbeenthesubjectofrecentlitigationiswhethertheDMCAsafe
harborprovisionsextendtopre1972soundrecordings.268Undersection512(c),an
internetserviceproviderisnotliableforinfringementofcopyrightbyreasonofthe
storageatthedirectionofauserofinfringingmaterial,providedthattheservicemeets
certainstatutoryconditions,includingtakedownrequirements.269Meanwhile,a
separateprovisionoftheAct,section301(c),preservesstatelawprotectionforpre1972
soundrecordings,statingthatanyrightsorremediesunderthecommonlaworstatute
ofanystateshallnotbeannulledorlimitedbythistitleuntilFebruary15,2067.270Inits
2011report,theOfficeexaminedtheinterplaybetweenthesetwoprovisions,and
concludedthattheDMCAsafeharborsdidnotapplytopre1972soundrecordings.271
AlthoughonedecisionpredatingtheOfficesreportfoundthattheDMCAsafeharbors
doapplytopre1972soundrecordings,272morerecentdecisionshaveagreedwiththe
CopyrightOfficethatthesafeharborsareacreatureoffederallawanddonotlimitstate
lawprotections.273
D. Synchronization Rights
Toincorporatemusicintoanaudiovisualworksuchasafilm,videotelevision
program,orvideogamethecreatorofthatworkmustobtainsynchronizationlicenses
fromboththeownerofthemusicalworkandtheownerofthesoundrecording.
Synchronization(oftenshortenedtosynch)referstotheuseofmusicintimed
relationtovisualcontent.274AlthoughtheCopyrightActdoesnotreferexplicitlytoa
See Flo & Eddie, Inc. v. Pandora Media, Inc.,No.14cv07648(C.D.Cal.Oct.2,2014);Complaint,

Capitol Records, LLC v. Pandora Media, Inc.,No.651195/2014(N.Y.Sup.Ct.Apr.17,2014);see also
EriqGardner,Sony, Google, Apple Hit With Lawsuits Over Pre1972 Music, HOLLYWOODREPORTER
(Jan.23,2015),http://www.hollywoodreporter.com/thresq/sonygoogleapplehitlawsuits
766187.
267
See 17U.S.C.512(a)(d).
268
17U.S.C.512(c).
269
17U.S.C.301(c).
270
PRE1972SOUND RECORDINGSREPORTAT13032.
271
Capitol Records, Inc. v. MP3tunes, LLC,821F.Supp.2d627,64042(S.D.N.Y.2011).But see
Capitol Records, Inc. v. MP3tunes, LLC,No.07cv9931,2012WL242827,at*1*2(S.D.N.Y.Jan.9,
2012)(citingCopyrightOfficereportandacknowledgingthatitsearlierdecisionmayinvolvea
substantialgroundfordifferenceofopinion).
272
Capitol Records, LLC v. Vimeo, LLC,972F.Supp.2d500,53637(S.D.N.Y.2013);see alsoCapitol
Records, LLC v. Vimeo, LLC,972F.Supp.2d537,552(S.D.N.Y.2013)(denyingmotionfor
reconsideration);Capitol Records, Inc. v. Naxos of America, Inc., 830N.E.2d250(N.Y.2005).
273
SeeSteele v. Turner Broad. Sys., Inc.646F.Supp.2d185,193(D.Mass.2009).
274
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U.S.CopyrightOffice
synchronizationright,itisgenerallyunderstoodtobeanaspectofmusicowners
reproductionand/orderivativeworkrights.275
Thelicensingofmusicforaudiovisualworks,unlikethatforotheruses,occursinthe
freemarketforbothmusicalworksandsoundrecordings.Thesynchmarketthus
standsasausefulcounterpointtotheregulatedlicensingmarketsdiscussedabove.A
notablefeatureofthesynchmarketistherelativelyevenbalancebetweenroyaltiespaid
forthemusicalworksrightsandthosepaidforthesoundrecordingrights.Musical
workandsoundrecordingownersaregenerallypaidequally50/50under
individuallynegotiatedsynchlicenses.276
Thesynchronizationmarketforusesincommercialworkssuchasfilm,television
programs,andvideogamesappearsreasonablyefficientandflexible.Inadditiontoin
houseresources,anumberofintermediarieshelphandlelicensingforthosewhowishto
usemusicinanewcreativework.Musicsupervisorsworkingforproduction
companiesfacilitateselection,negotiation,anddeliveryofmusicforuseinaudiovisual
productions.277CompaniessuchasGreenlight,Dashbox,CueSongs,andRumblefish
provideonlineservicesthatofferdifferentsongsforsynchronizationpurposes.278
Anevolvingaspectinthemusiclicensingmarketplaceistheexploitationofmusic
videosthatrecordlabelsproducetoaccompanynewreleases.Traditionally,any
royaltiesforthesevideoswerenominal,astheywerecreatedlargelytopromotesalesof
See, e.g.,Buffalo Broad. v. ASCAP,744F.2dat920;Agee,59F.3dat321.
275
SeeNMPA&HFAFirstNoticeCommentsat16;Tr.at60:2022(June4,2014)(BrittanySchaffer,
NMPA/Loeb&LoebLLP)(synchronizationlicensesaregenerallydividedintermsofincome
50/50betweensoundrecordingandthemusicalcomposition.).Whileparitymaybe
commonplaceforindividuallynegotiateddeals,thesamedoesnotseemtoholdtrueforbroader
licenseswithconsumerfacingvideoservicessuchasYouTube.UnderanHFAadministered
YouTubelicense,publishersarepaid15%ofYouTubesnetrevenuefromvideosuploadedby
nonrecordlabelusersthatincorporateHFAcontrolledpublishingrightsandembodya
commerciallyreleasedordistributedsoundrecording(i.e.,alipsyncvideo),and50%ofrevenue
fromvideosthatincorporateHFAcontrolledpublishingrightsbutausercreatedrecording(i.e.,
acoverrecording).NMPA/HFA/YOUTUBELICENSINGOFFER, Licensing Offer Overview,
http://www.youtubelicenseoffer.com/docs/notice.pdf(lastvisitedJan.29,2015).Bycomparison,
YouTubesstandardcontractforindependentrecordlabelsreportedlyallocates45%ofYouTube
subscriptionmusicvideorevenuetolabels,ascomparedto10%topublishers.EdChristman,
Inside YouTubes Controversial Contract with Indies,BILLBOARDJune20,2014,http://www.
billboard.com/biz/articles/news/digitalandmobile/6128540/analysisyoutubeindielabels
contractsubscriptionservice?mobile_redirection=false.
276
NMPA&HFASecondNoticeCommentsat1013.
277
Id.at1415.
278
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U.S.CopyrightOffice
recordsthroughmusicvideochannelssuchasMTV.279Butmorerecently,asvideos
havebecomeamongthemostcommonwaysinwhichconsumerswishtoenjoymusic,280
thereisstronginterestindevelopingthismarket.Recordlabelsseektolicensethese
professionallycreatedvideoswhichincorporatemusicalworkstoonlineproviders
suchasYouTubeandVevo.281
Intheearly2000smajorrecordlabelsandpublishersenteredintoNewDigitalMedia
Agreements(NDMAs)toallowlabelsefficientlytoobtainlicensesfromtheirmajor
publishercounterpartssotheycanpursuenewdigitalproductsandexploitmusic
videosinonlinemarkets.282Theselicensingarrangements,inturn,becameamodelfora
morerecent2012agreementbetweenUMGandNMPAthatallowedUMGtoseek
similarrightsfromsmallerindependentpublishersonanoptinbasis.Thelicensing
arrangementincludesrightsfortheuseofmusicalworksinMTVstylevideos,live
concertfootage,andsimilarexploitations.283
Likethemajorrecordlabels,largermusicpublishershaveenteredintodirectlicensing
relationshipswiththeondemandvideoproviderYouTubethatallowthemsome
amountofcontrolovertheuseofuseruploadedvideosincorporatingtheirmusicand
provideforpaymentofroyalties.284Followingthesettlementofinfringementlitigation
SeePASSMANat17778(reflectingthedeclineofthetraditionalmarketformusicvideoon
platformssuchastheMTVtelevisionnetwork);KOHNat1119(notingthatpromotionalmusic
videoshavesynchronizationfeesthatarequitenominal,setatanamountintendedmerelyto
covertheadministrativecostsofpreparingthepaperworkforthelicensegrant.Thisisbecause
thecopyrightownerstandstosubstantiallybenefitfrom...performanceroyaltiesresultingfrom
theexhibitionofthemusicvideo.).
279
RIAASecondNoticeCommentsat14.
280
VevoisajointventurebetweenUMG,SME,theAbuDhabiMediaCompany,andYouTube.
See AlexPham,YouTube Confirms Vevo Deal,BILLBOARD(July2,2013),http://www.billboard.com
/biz/articles/news/digitalandmobile/1568816/youtubeconfirmsvevodeal;see also PASSMANat
259(forrecordcompanyproducedvideosstreamed,therecordlabelsgetabout70%ofad
revenuesand/orsubscriptionmonies,andgenerallypaypublishersintherangeof10%ofthe
adrevenues(alittleunder15%ofthe70%thatthecompanygets)).
281
See RIAAFirstNoticeCommentsat14n.28;NMPASecondNoticeCommentsat33.
282
See id.at33;SusanButler,UMG/NMPA Broker Model License Agreement,MUSICCONFIDENTIAL,

June21,2012;EdChristman,NMPA Inks Deal With Universal Music Group Over VEVO, YouTube
Videos,BILLBOARD(June19,2012),http://www.billboard.com/biz/articles/news/publishing/
1093134/nmpainksdealwithuniversalmusicgroupovervevoyoutube.Thelicensing
arrangementexcludesrightsforsynchusesinmotionpictures,television,advertising,video
gamesandotherproductsthataretypicallyindividuallynegotiatedbypublishers.Id.
283
See YouTube Licensing Offer Overview,YOUTUBELICENSINGOFFER,http://www.youtubelicense

offer.com/notice(lastvisitedJan.26,2015).
284
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U.S.CopyrightOffice
byaclassofindependentmusicpublishersagainstYouTubein2011,285NMPAandits
licensingsubsidiaryHFAannouncedanagreementwithYouTubeinwhichsmaller
publisherscouldchoosetolicensetheirmusicalworkstoYouTubebyoptinginto
prescribedlicensingterms.Thosewhochoosetoparticipateinthearrangementgrant
YouTubetherighttoreproduce,distributeandtopreparederivativeworks(including
synchronizationrights)forvideospostedbyYouTubesusers.286Thelicensedoesnot,
however,coverthepublicperformanceright.Musicpublisherswhooptintothe
YouTubedealreceiveroyaltiesfromYouTubeandhavesomeabilitytomanagetheuse
oftheirmusicthroughHFA,whichadministerstherelationshipandcanaccess
YouTubescontentidentificationtoolsonbehalfofindividualpublishers.287Over3,000
musicpublishershaveenteredintothislicensingarrangementwithYouTube.288
Anotherdevelopingareaisthemarketforsocalledmicrolicensesformusicthatis
usedinvideosofmodesteconomicvalue,suchasweddingvideosandcorporate
presentations.Inthepast,incomereceivedbyrightsholdersfromlicensingsuchuses
mightnotovercomeadministrativeorothercosts.Butthemarketismovingtotake
advantageoftechnologicaldevelopmentsespeciallyonlineapplicationsthatmake
microlicensingmoreviable.ThisincludestheaforementionedserviceslikeRumblefish,
butalsoeffortsbyNMPA,HFA,andRIAAtolicensemoresynchronizationrights
throughprogramsthatallowindividualcopyrightownerstoeffectuatesmalllicensing
transactions.289
E. Licensing Efficiency and Transparency

Newdigitalservicesfaceaformidablechallengewhenattemptingtolicensemusic.One
studyshowedthatacquiringthenecessaryrightstoofferamarketabledigitalmusic
offering290requiresroughly18monthsofeffort,withsomeentitiesneverableto
See The Football Assn Premier League Ltd. v. YouTube, Inc.,633F.Supp.2d159(S.D.N.Y.2009).
285
YouTube License Agreement,YOUTUBELICENSINGOFFER,http://www.youtubelicenseoffer.com

/docs/license.pdf(lastvisitedJan.26,2015);see alsoSusanButler,Anatomy of a Trade Group License,
MUSICCONFIDENTIAL,Sept.9,2011.
286
See YouTube Licensing Offer Overview,YOUTUBELICENSINGOFFER,http://www.youtubelicense

offer.com/notice(lastvisitedJan.26,2015).
287
SusanButler,U.S. Music Licensing: The Rights Holders (Part Two, Conclusion),MUSIC
CONFIDENTIAL,June5,2014.
288
EdChristman,RIAA & NMPA Eyeing Simplified Music Licensing System, Could Unlock Millions
in New Revenue,BILLBOARD(June13,2013),http://www.billboard.com/biz/articles/news/record
labels/1566550/riaanmpaeyeingsimplifiedmusiclicensingsystemcould.
289
See RIAAFirstNoticeCommentsat8(Tobecompetitive,todaysstreaming,cloudand
subscriptionmusicservicesrequirelicensestothefullcatalogofsongs(andsharesthereof)
ownedbyvirtuallyeverymusicpublisher.);DiMASecondNoticeCommentsat16(Digital
serviceprovidersandrecordcompaniesdo,infact,needtoobtainlicensesformillionsofsongs
290
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U.S.CopyrightOffice
successfullynegotiatethelicensesneededtolaunchtheirservices.291Oneofthekey
reasonsforthiscomplexityisthelackofanauthoritativelistofrightsholdersandthe
recordings/workstheyrepresent.292
AsdiscussedindetailinSectionIII,itiswidelyacknowledgedthatreliable,uptodate
informationaboutcopyrightedworksisacriticalprerequisiteforefficientlicensingin
themodernmusicmarketplace.Bothcopyrightownersandmusicservicesmustbeable
touniquelyidentifyparticularsoundrecordingsandunderlyingmusicalworks,along
withthedynamicandoftenfracturedownershipstatusofthesedistinctworks.In
addition,theyneedtobeabletopairsoundrecordingswiththemusicalworksthey
embody.Whiletheindustryhasmadesomeprogressonthisfront,muchremainstobe
done.
1. Data Standards
Oneoftheinitialconsiderationsregardingmanagementofreliableanduptodate
copyrightinformationformusicalworksandsoundrecordingcopyrightsistheuseof
standardidentifiers.Fortunately,themusicindustryalreadyemploysavarietyof
standardidentifiersrecognizedbytheInternationalOrganizationforStandardization
(ISO),theinternationalstandardsettingbody.TheISOhasestablishedtwokey
standardsfortheidentificationofworksthemselvestheInternationalStandardMusic
WorkCode(ISWC)formusicalworks,andtheInternationalStandardRecording
Code(ISRC)forsoundrecordings.293
TheISWCrepresentsaunique,permanent,andinternationallyrecognizedreference
numberfortheidentificationofmusicalworks.Thestandardwasdevelopedbythe
InternationalConfederationofSocietiesofAuthorsandComposers(CISAC).Inthe
U.S.andCanada,ASCAPistheappointedagencythatassignsISWCs,andworkswith
inordertomeetconsumerexpectationsandbecommerciallyviable.).Notably,therecently
launchedstreamingserviceTheOverflowoffersalimitedcatalogofChristianmusicand
relatedgenres.GlennPeoples,David Beside Goliath: New Christian Music Streaming Service The
Overflow Points to a New Strategy,BILLBOARD(Jan.05,2015)http://www.billboard.com/articles/
business/6429451/overflowchristiansubscriptionstreamingmusicservice;THEOVERFLOW,
http://theoverflow.com(lastvisitedJan.20,2015)(reportingonrecentlylaunchedstreaming
serviceTheOverflow,whichoffersalimitedcatalogofChristianmusicandrelatedgenres).
DAVIDTOUVE,M USICBUSINESSASSOCIATION,THEINNOVATIONPARADOX: HOWLICENSING
alsoJohnSeabrook,
Revenue Streams: Is Spotify the Music Industrys Friend or Its Foe?,NEWYORKER(Nov.24,2014),
available athttp://www.newyorker.com/magazine/2014/11/24/revenuestreams(reportingthat
SpotifysU.S.licensingeffortstooktwoyears).
291
AND COPYRIGHT IMPACTS DIGITAL M USICS TARTUPS 67(2012)(TOUVE);see
TOUVEat5.
292
293
See JessopFirstNoticeCommentsat4.
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U.S.CopyrightOffice
otherrepresentativesofsongwritersandpublisherstoassignISWCs.Asrelevanthere,
toobtainanISWC,apublishermustprovidethefollowingminimum:atleastone
originaltitleforthework;allsongwritersoftheworkidentifiedbytheirInterested
PartiesInformation(IPI)code(discussedbelow);andwhethertheworkisderived
fromanexistingwork.294OnesignificantissuewithISWCs,then,isthattheycannotbe
assigneduntilallthesongwritersonamusicalworkareidentified.Thishasthebenefit
ofassuringthatdataarecompletebeforeanidentifierisattached.Butitalsoleadstoa
substantiallagtimebeforetheISWCforaparticularmusicalworkcanbeassigned
unfortunately,thiscanoccurwellafterarecordisreleased,sothatdigitalfiles
embodyingtheindividualtracksoftenwillnotincludeISWCsidentifyingthe
underlyingmusicalworks.295ASCAPandBMIwhichalsouseproprietarynumbering
systemstotrackworksinternallyaddISWCstotheirdatabasesasthosecodesare
assigned.296
TheISRCwascreatedasaunique,permanent,andinternationallyrecognizedreference
numberfortheidentificationofsoundandmusicvideorecordings.ISRCsareassigned
atthetrackratherthanalbumlevel.TheISOhasappointedIFPIastheinternational
ISRCagency.IFPIinturn,designatesnationalorregionalagenciestomanagethe
issuanceofISRCswithinaspecificcountryorregion.TheU.S.ISRCagencyisRIAA.
RIAAauthorizesindividualrecordlabelstoassignISRCstotheirownrecordings.297
ISRCsarerequiredtobeincludedondigitalfilesprovidedfortheiTunesstoreandby
manyotherdigitalplatforms.
TherearesomeshortcomingswiththeISRCsystem.First,thereisnosingledefinitive
U.S.databaseforISRCs.Instead,eachsoundrecordingownermustmaintainitsown
ISRCrecordsandmetadata.298Notably,however,SoundExchange,iscurrently
compilingadatabaseofsoundrecordingsperformedunderthesection112and114
What is an ISWC,ISWCINTERNATIONALAGENCY,http://www.iswc.org/en/iswc.html(last
visitedJan.9,2015).
294
Tr.at334:13337:20(June23,2014)(AndreaFinkelstein,SME;JacquelineCharlesworth&
SarangDamle,U.S.CopyrightOffice);Tr.at343:2344:16,346:1721(June23,2014)(Lynn
Lummel,ASCAP).
295
ASCAPSecondNoticeCommentsat11(Itshouldbeunderscoredthateachworkwillhave
twoidentifierstheISWCaswellasthePROsowninternalWorkIDnumber.).
296
Obtaining Code,USISRC,http://www.usisrc.org/about/obtaining_code.html(lastvisitedJan.25,
2015).RIAAalsoauthorizesISRCmanagerstoassignISRCstosoundrecordingsproducedby
artistsandlabelsthatdonotwishtomanagetheirownISRCassignments.Id.; see also Registration
Fees,USISRC,http://www.usisrc.org/faqs/registration_fees.html(lastvisitedJan.25,2015).
297
PipelineProject2014,BelmontUniversitysMikeCurbCollegeofMusicBusinessand
Entertainment(PipelineProject)SecondNoticeCommentsat7;see alsoTypes,USISRC,
https://www.usisrc.org/applications/types.html(lastvisitedJan.25,2015).
298
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U.S.CopyrightOffice
licenses,andexpectstohavegoodidentificationandownershipinformation,including
ISRCs,forapproximately14millionrecordingsintherelativelynearterm.299
Inaddition,inthecaseofmultipleowners,ISRCsdonotrequireacompletelistof
ownersbeforeassignmentofISRCs.Instead,theISRCwebsiterecommendsthat
multipleownerssimplydesignateoneoftheownerstoassigntheISRC.300
TheISOhasadoptedtwoothercodestoidentifytheindividualsorentitiesassociated
withparticularworks.TheIPIcodeallowsamusicalworktobeassociatedwiththe
variouspartiesthatareinvolvedinitscreation,marketing,andadministration.IPI
codesapplytocomposers,authors,composer/authors,arrangers,publishers,
administrators,andsubpublishers.ThecodesareassignedbyCISACandarenecessary
toobtainanISWC.301
TheInternationalStandardNameIdentifier(ISNI)isakintotheIPI,butwhiletheIPI
schemeislimitedtomusicalworks,ISNIisdesignedtobeaglobalidentificationsystem
forcreatorsofalltypesofcopyrightedworks,includingauthors,songwriters,recording
artists,andpublishers.TheISNIInternationalAgencywasfoundedin2010todevelop
thestandard,withthegoalofeventuallyreplacingexisting,disparateidentification
standards,includingtheIPI.302ISNIsareassignedbyaninternationalnetworkof
registrationagencieswhichrelyuponacentralizeddatabasetoassignandtrackISNI
identifiers.303Over8millionidentitieshavebeenregisteredsofaracrossmultipleclasses
ofcreatorsandworks.304Atthemoment,however,itappearsthatmostISNIsarebeing
assignedtoliteraryauthorsinEurope.Italsoseemsthatthenumberofregistration
agenciesgloballyremainslimited,withonlyoneagencysofarintheUnitedStates.305
SoundExchangeSecondNoticeCommentsat45.
299
PipelineProjectSecondNoticeCommentsat7.
300
The IPI System,IPISYSTEM.ORG,http://www.ipisystem.org/SUISASITES/IPI/ipipublic.nsf/

pages/index1(lastvisitedJan.9,2015).
301
SeeJenniferGatenby&AndrewMacEwan,ISNI: A New System For Name Identification,
INFORMATIONSTANDARDSQUARTERLY ,Summer2011,at45,available athttp://www.niso.org/
publications/isq/2011/v23no3/gatenby;JenniferGatenby&JoepKil,ISNI From Development to
Operations,ISNI,www.isni.org/filedepot_download/58/95.
302
303
SeeGatenby&MacEwan,ISNI: A New System For Name Identificationat45.
304
ISNI,http://www.isni.org(lastvisitedJan.9,2015).
PipelineProjectSecondNoticeCommentsat5.Bowker,anaffiliateofProQuest,assignsISNIs
andtrackstheassignmentandusageofthem.See Bowker Becomes First ISNI Registration Agency in
the U.S.,BOWKER(June21,2012),http://www.bowker.com/enUS/aboutus/press_room/2012/
pr_06212012a.shtml;Bowker,Use of ISNI Is Growing Fast Among Authors, Says New Bowker
Analysis,YAHOOFINANCE(May7,2014),http://finance.yahoo.com/news/isnigrowingfast
amongauthors144800650.html.
305
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U.S.CopyrightOffice
ThemusicindustryalsoemploysidentifiersnotassociatedwithISO,including
UniversalProductCodes(UPC).Inthemusiccontext,aUPCisasetofnumbers,
alongwithacorrespondingbarcode,thatidentifyafinishedmusicproduct.Adifferent
UPCisusuallynecessaryforeachproductorversionofaproducttodistinguishamong,
forexample,albums,digitalsingles,orremixedversionsofsoundrecordings.UPCsare
generallyrequiredbymostmajorphysicalretailers,andarenowrequiredbytheiTunes
storeandotherdigitalplatforms.RecordlabelsgenerallyacquireUPCsfromGS1US,a
nonprofitgroupthatsetsstandardsforinternationalcommerce.UPCscanalsobe
obtainedforfreeoratanominalcostfromamusicdistributorsuchasCDBabyor
TuneCore.306
Inadditiontostandardsthathavebeenorarebeingdevelopedbyinternational
standardsettingentities,therearealsoprivateinitiativesforidentifyingmusicandits
owners,forexample,throughtheuseofdigitalacousticfingerprintingandsimilar
technologies.ExamplesincludeGracenote,Shazam,andTheEchoNestandperhaps
mostnotably,YouTube.Anacousticfingerprintisadigitalrenderingoftheacoustical
propertiesofaparticularsoundrecording,typicallyoneembodiedinadigitalfilesuch
asanmp3file.Thatfingerprintcanbestoredandsearchedformatchestootherdigital
musicfiles.307Anacousticfingerprintdoesnot,onitsown,provideownershipor
authorshipinformation,butitcanbeassociatedwithmetadatasuchasthe
standardizedidentifiersdiscussedabovethatdoes.Oneadvantageofusingdigital
fingerprintsisthatwhileitisrelativelytrivialtostripmetadatasuchasISRCsand
ISWCsfromindividualmusicfiles,itisarguablymoredifficulttoalterafilesacoustic
fingerprintwithoutchangingthequalityoftheaudio.308
2. Public Data
TheU.S.CopyrightOfficeoperatesapublicregistrationsystem,whichmaintains
informationthatcanhelptoidentifymusicalworks,soundrecordings,andtheir
owners.Theregistrationdatabase,however,isnotacomprehensiveresourceforthis
purpose.Copyrightregistrationisnotmandatory,andsoregistrationrecordsarefar
How to Get UPC Barcodes for Your Products,WALLST.J.,http://guides.wsj.com/small

business/startingabusiness/howtogetupccodesforyourproducts2(lastvisitedJan.9,2014);
KristinThomson,Metadata for Musicians,FUTUREOF MUSICCOALITION(Nov.4,2014),
https://futureofmusic.org/article/article/metadatamusicians.
306
MichaelBrown,White Paper: Audio Fingerprinting,MAXIMUM PC(Apr.3,2009),http://

www.maximumpc.com/article/features/white_paper_audio_fingerprinting.
307
SeeCiumacSergiu,Duplicate Songs Detector Via Audio Fingerprinting, CODEPROJECT(June20,
2013),http://www.codeproject.com/Articles/206507/Duplicatesdetectorviaaudiofingerprinting.
308
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U.S.CopyrightOffice
fromcomplete.Inaddition,evenwhenaworkhasbeenregistered,theregistration
recordisstaticandthuswillnotreflectachangeinownership.309
ThedatabasethathousestheOfficesregistrationrecordsisnotcurrentlydesignedto
identifyorlocateworksthroughtheuseofstandardidentifiers,suchasthosedescribed
above,andsuchidentifiersarenotrequiredintheregistrationprocess.310Asaresult,a
relativelysmallnumberofregistrationrecordsformusicalworksandsoundrecordings
reflectthesestandardidentifiers.311
Apartfromtheoriginalregistration,some,butnotall,copyrightownerschooseto
recordassignmentsandtransfersofownershipthroughtheCopyrightOffices
recordationprocess.Again,however,suchrecordsarefarfromcomplete.312Nor,dueto
thehistoricalseparationoftheregistrationandrecordationsystems,isinformation
aboutrecordeddocumentsreliablylinkedtoregistrationrecords.313
3. NonGovernment Databases
Severalentitiesactivelydevelopandmaintaintheirowndiscretedatabases,manyof
whichincludestandardidentifiersandothermetadatausedbythemusicindustryto
tracksoundrecordingsandmusicalworks.
Asnotedabove,theRIAAdoesnotkeepacentraldatabaseofsoundrecordings
associatedwithISRCs,andsothemostcomprehensiveU.S.soundrecordingdatabaseis
likelythatofSoundExchange.SoundExchangemaintainsadatabaseofsound
recordingswhoseuseshavebeenreportedtoitunderthesection112and114licenses,
togetherwithinformationregardingtheassociatedrecordingartistsandlabels.This
ROBERTBRAUNEIS,ABRAHAML.KAMINSTEINSCHOLARIN RESIDENCE,U.S.COPYRIGHT
OFFICE,TRANSFORMINGR ECORDATIONAND REENGINEERING ATTHEUNITEDSTATESCOPYRIGHT
OFFICE127129(2015)(BRAUNEIS),available athttp://www.copyright.gov/docs/recordation/.
309
TechnologicalUpgradestoRegistrationandRecordationFunctions,78Fed.Reg.17,722(Mar.
22,2013);BRAUNEISat120121.
310
AsofMarch2013,forexample,ISRCswereassociatedwithonly5,510(0.03%)ofregistration
recordsintheCopyrightOfficeCatalog.Id. at121.
311
312
Id.at110111.
Id.TheOfficehasrecentlyembarkeduponpublicprocessestoconsiderpossibleupgradesto
itssystemsthatcouldimprovethesearchabilityandusabilityofitsrecords.Suchchangesmight
include,forexample,amorerobustregistrationdatabaseandashifttoamoreuserfriendlyand
accessibleelectronicrecordationsystem.See StrategicPlanforRecordationofDocuments,79Fed.
Reg.2696(Jan.15,2014);TechnologicalUpgradestoRegistrationandRecordationFunctions,78
Fed.Reg.17,722(Mar.22,2013).
313
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U.S.CopyrightOffice
databaseisnotcurrentlypubliclyaccessibleoravailabletobeusedforlicensing
purposes.314
Intherealmofmusicalworks,HFAmaintainsanextensivedatabaseofownership
informationandprovidesanonlinetoolenablingthepublictosearchforsongwriterand
publisherdataforallsongsthathavebeenregisteredbyitsmemberpublishers.315
ASCAP,BMI,andSESACeachalsohavedatabasescoveringthecompositionsintheir
repertoiresthatareavailabletothepublicthroughtheirrespectivewebsites.316In
addition,ASCAPandBMIalongwiththeSocietyofComposers,AuthorsandMusic
PublishersofCanada(SOCAN)arecurrentlycollaboratingtocreateacommon,
authoritativeresourceforthemusicalworksrepresentedbytheseveralorganizations.
Thejointinitiative,calledMusicMark,willenablepublisherstosubmitasinglefilefor
registrationofasongandreviseownershipdataacrossthePROssimultaneously,evenif
theworkwascowrittenbymembersofdifferentsocieties.EachPROwillthenintegrate
theregistrationdataintoitsownrepertoiredatabase.ByenablingPROmembersto
moreefficientlyregistermusicalworksthroughasingleinterfaceincludingworksco
writtenbysongwriterswhoaremembersofdifferentPROsMusicMarkshould
provideamoreaccurateandsynchronizedviewofcopyrightinformationforworksin
therepertoiresoftheparticipatingPROs.317
Whileeachofthesedatabasesrepresentsanimportantandvaluablecomponentofthe
U.S.musicmarketplace,becausetheyareseparateandseparatelycontrolled,theydonot
offeracomprehensivelicensingresource.TheHFAandPROdatabasesarecurrently
searchablebythepubliconlymanually,onanindividualsongbasis.318Inaddition,
theseorganizationsdonotwarranttheaccuracyorcompletenessoftheinformationthey
provide(perhapsbecausetheyarerelyinguponrepresentationsbythirdparties
concerningauthorshipandownership).319Finally,itisunclearwhateffectpublisher
314
SONGFILE,http://www.songfile.com(lastvisitedJan.25,2015).
315
ASCAPsdatabaseiscalledACE,andBMIsdatabaseiscalledtheBMIRepertoire.See Ace Title

Search,ASCAP,https://www.ascap.com/Home/acetitlesearch/index.aspx(lastvisitedJan.29,
2015);BMI Repertoire,BMI,http://repertoire.bmi.com/startpage.asp(lastvisitedJan.29,2015).
SESACalsohasadatabasecalledSESACRepertory.SESAC Repertory,SESAC,
http://www.sesac.com/Repertory/RepertorySearch.aspx?x=39&y=19(lastvisitedJan.29,2015).
316
317
MUSICM ARK ,http://www.musicmark.com(lastvisitedJan.9,2015).
See SONGFILE,http://www.songfile.com(lastvisitedJan.25,2015);Ace Title Search,ASCAP,

https://www.ascap.com/Home/acetitlesearch/index.aspx(lastvisitedJan.29,2015);BMI
Repertoire,BMI,http://repertoire.bmi.com/startpage.asp(lastvisitedJan.29,2015);SESAC
Repertory,SESAC,http://www.sesac.com/Repertory/RepertorySearch.aspx?x=39&y=19(last
visitedJan.29,2015).
318
Terms of Use Agreement,ASCAP,http://www.ascap.com/about/legalterms/termsofuse.aspx

(lastvisitedJan.16,2015);Terms and Conditions of Use,BMI,http://www.bmi.com/legal/entry/
319
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U.S.CopyrightOffice
withdrawalfromthePROsinfavorofdirectadministrationoftherelevantrights
shoulditcometopassmighthaveontheefficacyofthePROdatabases.320
4. International Efforts
Oneexampleofinternationaleffortstoaddressdatainformationdeficienciesis(orwas)
theplannedGlobalRepertoireDatabase(GRD)formusicalworks,tobedevelopedby
aworkinggroupspearheadedandfundedbymusicpublishersandcollective
managementorganizationsintheEUwiththesupportoftheWorldIntellectual
PropertyOrganization(WIPO).TheGRDwasintendedtoprovideacomprehensive
andauthoritativesourceofdataabouttheownershipandadministrationofmusical
worksthroughouttheworld.Itssupportersanticipatedenablingregistrationsdirectly
frompublishers,composersandcollectivemanagementorganizations,andmaintaining
adatabaseofthoseregistrations,withprocedurestoresolveownershipdisputes.
Unfortunately,despitetheacknowledgedneedforsolutionsindatasharing,supportfor
theprojecthaswanedandtheGRDefforthasbeenputonhold(atleastforthetime
being).321
Asimilareffortremainsunderwaywithrespecttosoundrecordings.Phonographic
PerformanceLtd(PPL),theU.K.collectiverightsorganization,isbuildingaGlobal
RecordingsDatabaseandhassofarcompiledownershipdataonover5.6million
recordingsreleasedintheUnitedKingdom.PPLintendstoexpanditseffortsby
terms_and_conditions_of_use(lastvisitedJan.25,2015);SESAC Repertory Terms and Conditions,

SESAC,http://www.sesac.com/Repertory/Terms.aspx(lastvisitedJan.25,2015);Songfile Terms of
Use,SONGFILE,http://www.songfile.com/termsofuse.html(lastvisitedJan.25,2015).
Notably,inthewakeofthePandora decisionwhichcriticizedUMPGsandSony/ATVs
failuretoprovidecatalogdatatoPandorathesepublishershaverecentlypostedtheirU.S.
catalogsonline.See PressRelease,UMPG,UniversalMusicPublishingGroupToOfferExpanded
AccessToSongCatalogDataThroughCompanysWebsite(June27,2014),available at
http://www.umusicpub.com/#contentRequest=newsdetail&contentLocation=sub&
contentOptions=%26articleID%3D6437%26from%3Dpressreleases;Sony/ATV Makes Entire
Catalogue Available Online,MUSICBUSINESSWORLDWIDE(JULY16,2014),http://
www.musicbusinessworldwide.com/sonyatvmakesentirecatalogueavailableonline/.
320
PRS disappointed at Global Repertoire Database collapse,MUSICALLY(June11,2014),

http://musically.com/2014/07/11/prsdisappointedatglobalrepertoiredatabasecollapse;Paul
Resnikoff,Repertoire Database Declared a Global Failure. . . , DIGITALMUSICNEWS(July10,2014),
http://www.digitalmusicnews.com/permalink/2014/07/10/globalrepertoiredatabasedeclared
globalfailure.
321
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U.S.CopyrightOffice
workingwithmajorrecordcompaniesandarangeofoverseasmusiclicensing
companiestoincludeworldwidedata.322
AnotherinitiativeistheU.K.sCopyrightHub,awebportalconnectedtoanetworkof
rightsholdersthataimstomakeiteasierforpeopletotrackdownandlicense
copyrightedworks.323Atpresent,theCopyrightHubsfunctionalityisfairlybasic,
offeringhelpfulinformationaboutcopyrightlawandwebsitelinkstolicensing
organizations.Theplanistochangefromasignpostingtoolintoaninquiryrouterthat
sendsqueriestorightsmanagersdatabases,andreturnsresultstoHubusers.324In
addition,furtherdevelopmentmayenablecreatorstoregisterrightsinformationwith
thirdpartyregistrieslinkedtotheHub.325
5. Data Sharing Initiatives

Asexplainedabove,dataregardingthecreation,ownership,andadministrationof
soundrecordingsandmusicalworksarecurrentlymaintainedindiscreteand
independentlyadministereddatabases.Anumberofinitiativeshaveattemptedto
overcomethissituationbydevelopingstandardsrelatedtothecommunicationof
informationaboutworksamongdisparatesources.Inparticular,theseinitiativesare
aimedatallowingrelevantinformationandmetadatatobeefficientlycommunicatedin
acommonformatsothateachpartyrequiringaccesstothedatacanunderstandand
automaticallyprocessthatdatawithoutexcessiveadministrativecosts.
OnesuchinitiativeisDigitalDataExchange(DDEX),anindustryconsortium
consistingofmediacompanies,musiclicensingentities,digitalserviceprovidersand
others.326DDEXhasdevelopedstandardizedformatsinwhichrightsandlicensing
informationisrepresentedandcommunicated.327Forexample,DDEXoffersdigitalsales
reportsstandardsthatarebeingusedintheU.K.toprovidestandardreportingformats
RICHARDHOOPER&ROSLYNCH,COPYRIGHTWORKS: STREAMLININGCOPYRIGHT LICENSING

athttp://www.copyrighthub.co.uk/Documents/dce
reportphase2.aspx.
322
FOR THEDIGITALA GE3 (2012),available
323
THECOPYRIGHTHUB,http://www.copyrighthub.co.uk(lastvisitedJan.25,2015).
324
Id.
Id.;TomCox,Copyright Hub Pilot Introduced in the UK, INTELLECTUALPROPERTYBLAWG(Aug.

8,2013),http://www.intellectualpropertyblawg.com/copyrightlaw/copyrighthubpilot
introducedintheuk;Welcome to the Copyright Hub,WORLD INTELLECTUALPROPERTYREVIEW
(Jan.9,2013),http://www.worldipreview.com/article/welcometothecopyrighthub.
325
See DDEXFirstNoticeCommentsat1.
326
See, e.g.,MUSICBUSINESSASSOCIATION ,MUSICM ETADATASTYLEGUIDEV2,at3538,available

at http://musicbiz.org/wpcontent/uploads/2014/08/MusicMetadataStyleGuideMusicBiz
FINAL.pdf(lastmodifiedAug.14,2014).
327
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betweendigitalmusicservicesandtheU.K.PRO,PRSforMusic.328Byemploying
DDEXmessagingstandards,entitieswishingtotransactwithmultiplecompaniescan
avoidhandlingmultipleformatsanddeliverymethods.329
AsimilarinitiativeisWIPOsproposedInternationalMusicRegistry(IMR),which
seekstoprovideasingleaccesspointtothedifferentrightsmanagementsystemsused
aroundtheworld.WIPOiscurrentlyconductingaseriesofstakeholderdiscussionson
theIMRsscopeandstructure.330
PressRelease,RightsFlow,PRSForMusicAndRightsflowPartnerOnDDEXStandardized
ReportingInitiative(Dec.13,2010),http://mi2n.com/print.php3?id=136849.
328
See DDEXFirstNoticeCommentsat12.
329
What Copyright Infrastructure is needed to facilitate the Licensing of Copyrighted Works in the Digital
Age: the International Music Registry?,WIPO,http://www.wipo.int/edocs/mdocs/mdocs/en/
wipo_ip_aut_ge_11/wipo_ip_aut_ge_11_t12.doc;The International Music Registry,WIPO,
http://www.wipo.int/imr/en(lastvisitedJan.27,2015).
330
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III.
Challenges of the Current System
Perhapsnotsurprisinglyinlightofitsbewilderingarrayofrightsandpractices,those
whoparticipatedinthestudyidentifiedmanysignificantobstaclesinthecurrentmusic
licensingmarketplace.Asdetailedbelow,stakeholdershaveawiderangeofopinions
concerninghowbesttoaddressthem.
Despitetheareasofcontroversy,however,onasomewhatbrighternote,study
participantswereabletoarticulatesomebroadareasofconsensusastotheoverarching
principlesthatshouldguideanyrevisionofourlicensingsystem,asfollows:First,
musiccreatorsneedtobefairlycompensatedfortheirefforts.331Second,thelicensing
processneedstobemoreefficient,includingthroughbundlingofnecessaryrights.332
Third,marketparticipantsneedaccesstoauthoritativedatatoidentifyandlicensethe
musictheyuse.333Andfourth,usageandpaymentinformationshouldbetransparent
See, e.g.,CopyrightAllianceFirstNoticeCommentsat6(Webelieveallauthorsandcreators
areentitledtofaircompensationfortheircreativework.);DiMAFirstNoticeCommentsat1
(DiMAmemberssharethebeliefthatrightsownersshouldbeappropriatelycompensatedfor
theuseofcopyrightedworks.);NMPA&HFAFirstNoticeCommentsat31(notingthat[f]or
musicpublishersandsongwriters,musiclicensingisonlyeffectiveifitprovidesafairmarket
royaltyfortheuseoftheirsongs);SGAFirstNoticeCommentsat3(identifyingfairmarket
valuecompensationfortheuseofmusicalworksasanindispensableneed).
331
See, e.g.,PublicKnowledge&CFAFirstNoticeCommentsat5(Copyrightlawsmusic
licensingprovisionscanhelpalleviate...bottlenecksandmakemusiclicensingmoreefficient
andfairforall.);NMPA&HFAFirstNoticeComments(Musicpublishersandsongwritersseek
anefficientdigitalmusicmarketplace....);RIAASecondNoticeCommentsat13(Commenters
desireamoreefficientlicensingprocess,andfocusedonblanketlicensingasonewaytoachieve
suchefficiency.);NARASFirstNoticeCommentsat2(TheRecordingAcademysupportsa
structurethatisfair,simpleandefficientforboththelicensorandlicensee.);GIPCSecond
NoticeCommentsat7(urgingtheOfficetokeepinmindissuesofefficiencyinthemarketplace
soastofacilitatenew,licensedservices).
332
See, e.g.,ModernWorksMusicPublishingFirstNoticeCommentsat10(Congressshould
encouragecooperationamonglicensorstocreatetechnologiesthatenablelicenseestoeasily
searchrightsdatabases.);PilotMusicBusinessServicesSecondNoticeCommentsat3([O]ne
centralizeddatabaseisneeded);PipelineProjectSecondNoticeCommentsat18(Itseemstous
thatthestatutorylicensewasthetwentycenturyssolutiontoefficiency;however,asweprogress
furtherintothedigitalage,andasdatabecomesmoreuseful,wenolongerseeagreatneedfora
compulsorylicense.);Tr.381:0411(June23,2014)(WaleedDiab,Google/YouTube)([T]he
abilitytomatchtheinformationonthesoundrecordingsideandthecompositionsideis
absolutelynecessary....Ithinkwhatyouarehearingis,thereisabsolutelyaneedfora
centralized,standardized,database,somewherethatservicescangoandpullthatinformation.).
333
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andaccessibletorightsowners.334Manyofthestakeholderscommentsreflectthese
importantgoals.
A. Compensation and Licensing Disparities

1. Effect of Market Trends on Creator Income
AccordingtotheSupremeCourt,copyrightisintendedtoincreasetheharvestof
knowledgebyassuringcreatorsafairreturnfortheirlabors.335And,asnotedabove,
industryparticipantsareingeneralagreementthatawellfunctioningmusiclicensing
systemshouldadequatelycompensatethosewhocreateandrecordsongs.336Thereis,
however,substantialdebateastowhetherthecurrentmusiclicensingsystemis
achievingthisgoaland,ifitisnot,thereasonswhyitisfailingcreators.
Inrecentyears,manymusiccreatorshavedecriedwhattheyseeasaprecipitousdecline
intheirincome.337Understandingthereasonsforthisapparentdecreaserequiresabasic
understandingofcreatorsvariousincomestreams.Songwritershavethreeprimary
sourcesofincome,whichtheygenerallysharewithmusicpublishers:mechanical
royalties,synchronizationroyalties,andperformanceroyalties.Recordingartistsreceive
ashareofrevenuesfromtheirrecordlabelsforthesaleofphysicalanddigitalalbums
andsingles,soundrecordingsynchronizationroyalties,anddigitalperformance
See, e.g.,NSAISecondNoticeCommentsat23(expressingconcernaboutadvancesand
bonusesthatareneverpaidtothesongwriterorcomposerandproposingrequiringthatsuch
paymentsbedisclosedbyrecordlabelsandmusicpublishers);SGAFirstNoticeCommentsat3
(callingforcompletetransparencythroughoutthelicensing,useandpaymentprocess);Kohn
FirstNoticeCommentsat11(proposingthatserviceprovidersberequiredtoprovide
transparentaccesstotransactiondatainrealtimetoanindependentvalidationservice);RIAA
SecondNoticeCommentsat19(Themajorrecordcompanies...supporttheideathatwhere
thereisdirectlicensing,publishers/writersshouldhaveadirectauditrightwithrespecttothird
partiesthatusetheirworks.).
334
335
Harper & Row Publishers, Inc. v. Nation Enters.,471U.S.539,54546(1985).
SeeRIAASecondNoticeCommentsat8([N]obodyseemstoquestionthebasicpremisethat
royaltyratesshould reflectfairmarketvalue.).
336
See, e.g.,SGAFirstNoticeCommentsat10([T]heincomeofthemusicandrecording
industries(andespeciallyofindividualmusiccreatorsandrecordingartists)havebeen
diminished,accordingtoreliableestimates,byasmuchastwothirds.);A2IMFirstNotice
Commentsat10(notingthatthedeclineinsoundrecordingrevenueshashadadramatic
effectontheincomeofbothmusiclabels...andtheirrecordingartists);see alsoNateRau,
Nashvilles musical middle class collapses,THETENNESSEAN(Jan.13,2015),http://
www.tennessean.com/story/entertainment/music/2015/01/04/nashvillemusicalmiddleclass
collapsesnewdylans/21236245(observingthatindustrytrendshaveledtothecollapseof
Nashvillesmusicmiddleclass).
337
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royalties.Inaddition,recordingartistsmayderiveincomefromliveperformances,the
saleofmerchandise,andothersources.338
a. From Physical Formats to Downloads to Streaming

Inrecentyearstherehasbeenaprofoundshiftinthewaymusicisconsumedfrom
purchasesofphysicalalbums,todownloadsofdigitalsingles,toondemandaccess
throughdigitalstreamingservices.Theseshiftsinmusicconsumptionpatternshaveled
tocorrespondingchangesintherelativemixofincomestreamstocopyrightownersin
particular,anincreasedrelianceonperformanceroyaltiesascomparedtoreproduction
anddistributionroyalties.339
Forexample,thebelowchartsfromtheRIAAillustratetheshiftfromU.S.physicalsales
todigitaldownloadsandothersourcesofrevenuefrom2004to2013.Theyreflect
remarkablechangeinlessthanadecade:340
Undersocalled360recorddeals,artistsmayberequiredtoshareaportionofthese
additionalrevenueswiththeirlabel. SeeDougBouton,Note,The Music Industry in Flux: Are 360
Record Deals the Saving Grace or the Coup de Grace?,9VA.S PORTS& ENT.L.J.312,318(2010).
338
See, e.g.,IPACFirstNoticeCommentsat13(observingthatthedeclineinrevenuefrom
physicalalbumsales,todownloads,andultimatelystreaming,hasdrasticallyreducedthe
incomeopportunitiesforsongwritersandcomposers);RIAASecondNoticeCommentsat38
(Songwritersandrecordingartistshavebecomemoredependentonperformancerevenue,but
thatrevenueisnotsufficientonitsowntosustainalivelihood.).
339
SeeRIAA,A Fruitful Anniversary for iTunes, MUSICNOTESB LOG(Apr.25,2013),

http://www.riaa.com/blog.php?content_selector=riaanewsblog&blog_selector=AFruitful
Anniversary&blog_type=&news_month_filter=4&news_year_filter=2013(providing2004chart);
RIAAFirstNoticeCommentsat51(providing2013chart).Chartsreproducedwiththe
permissionofRIAA.
340
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OtherdatafromtheRIAAshowhowstreaming,inparticular,hasboomedinrecent
years:341
NMPAsubmitteddatashowingasimilarshift.342In2012,NMPAreportedthat30%of
U.S.musicpublisherrevenuescamefromperformanceroyalties,36%frommechanical
royalties,28%fromsynchroyalties,and6%fromothersources.343Twoyearslater,
NMPAreportedthat52%ofmusicpublisherrevenuescamefrompublicperformance
royalties,whileonly23%camefrommechanicalroyalties,20%fromsynchlicenses,and
5%fromothersources.344Otherrecentsalesdatashowthatstreamingiscontinuingits
surgeaccordingtoNielsen,thenumberofondemandstreamsintheUnitedStates
grew54%from2013to2014,withover164billionsongsstreamedondemandthrough
audioandvideoplatforms.345
Themeteoricriseofstreaminghascorrespondedwithasharpdeclineinphysicaland
digitaldownloadsales.In2014,accordingtoNielsendata,totalU.S.albumsales(in
bothphysicalanddigitalformats)fellby11.2%,anddigitaldownloadsalesdecreased
RIAAFirstNoticeCommentsat50.ChartreproducedwiththepermissionofRIAA.

341
NMPASecondNoticeCommentsat8(citingsources).
342
EdChristman,NMPAs David Israelite to Congress: A More Efficient Mechanical Licensing System,
Billboard(June13,2012),http://www.billboard.com/biz/articles/news/publishing/1093490/
nmpasdavidisraelitetocongressamoreefficientmechanical.
343
PressRelease,NMPA,U.S.MusicPublishingIndustryValuedat$2.2Billion(June11,2014),
available athttps://www.nmpa.org/media/showrelease.asp?id=233.
344
NIELSEN, 2014NIELSEN MUSICU.S.REPORT,http://www.nielsen.com/content/dam/corporate/
us/en/public%20factsheets/Soundscan/2014yearendmusicreport.pdf.
345
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12.5%,fromtheyearbefore.346Ofcourse,thishasbeenaccompaniedbyacommensurate
dropinmechanicalrevenuesformusicpublishersandsongwriters.AccordingtoNSAI,
[m]anysongwritersreportareductionof60to70%ormoreinmechanicalroyalties,
andthoseroyaltiescontinuetodecreasebyanalarmingrate.347Manybelievethatin
thenottoodistantfuture,interactivestreamingwilleclipsedigitaldownloadsto
becomethedominantmeansbywhichconsumersaccessmusic.348
Meanwhile,sincethelate1990s,therehasbeenamarkeddeclineinindustryrevenues
overall.349RIAAobservesthat,since1999,totalU.S.recordedmusicretailrevenueshave
droppedabout53%.350AsrelativenewcomerSpotifysummedupthesituation,the
majorityofrevenueintheindustryhasevaporated.351
Whatisamatterofsomedebateamongstakeholders,however,istheactualcauseofthis
strikingdecline.Somecommentersviewthereductioninoverallrevenueandcreator
incomeastheresultofordinarymarketforces.Forexample,NABsuggestedthat
generalmarketfactorsincludinganextendedrecession,adeclineinconsumer
discretionaryspending,andincreasedcompetitionforconsumersshrinking
entertainmentbudgetshaveallcontributedtoreducedcreatorincome.352Other
Id.;see also BMISecondNoticeCommentsat16([T]heinstantavailabilitytothepublicofthe

widestpossiblechoiceofrecordedmusicbymeansofstreamingtechnologyhascomeatthe
expenseofanacceleratingdropoffinthesaleofrecordings(hardcopiesanddownloads).).
346
347
NSAISecondNoticeCommentsat6.
SeeIFPI,DIGITALMUSICREPORT2014,at5,http://www.ifpi.org/downloads/DigitalMusic
Report2014.pdf(Itisnowclearthatmusicstreamingandsubscriptionisamainstreammodel
forourbusiness.);ASCAPFirstNoticeCommentsat56(statingthatdigitalmusicstreaming
servicesaccountforanincreasinglylargeportionofmusicrevenuesintheU.S.);
SoundExchangeFirstNoticeCommentsat22(Themusicmarketplacechangedrapidlyfromone
longdominatedbythesaleofphysicalproducts,tooneinwhichdigitaldownloadsarethe
primarymeansofacquiringownershipofcopies.Now,itischangingagain,andobtainingaccess
tomusicthroughstreamingservicesisascendant.).
348
SeeMichaelDeGusta,The REAL Death of the Music Industry,BUSINESSINSIDER(Feb.18,2011),

http://www.businessinsider.com/thesechartsexplaintherealdeathofthemusicindustry2011
2.
349
350
How is Spotify contributing to the music business?,SPOTIFY,http://www.spotifyartists.com/

spotifyexplained/#howisspotifycontributingtothemusicbusiness(lastvisitedJan.30,2015)
(citingglobaldata).
351
352
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stakeholdersidentifiedindustryspecificmarkettrendsasareasonforthedecline,such
asincreasedcompetitiondrivingdownthevalueofsynchlicenses.353
Othersattributeatleastagoodportionofthedecreasetotheshiftfromalbumsalesto
individualsongpurchases.354IPACexplainedthisdynamicinthecontextofmechanical
royalties:
Dramaticallyloweralbumsalesistheprimarymarketdevelopmentthat
hasledtosongwritersreportingsignificantincomedeclinesinrecent
years.DuringtheheydayoftheCD,albumcutsmadealmostasmuch
moneyinmechanicalroyaltiesasthemostpopularsingleontheCD.
Todaysmusicindustryisseeingsignificantlyfewerfullalbumpurchases
andsignificantlymoreindividualsongpurchases.Asaresult,
mechanicalroyaltyincomegeneratedfromthesongsonanalbumhas
declineddramatically,leadingtothedeclineinsongwriterincome.355
ButIPACalsoobservedthatthistrendhasbeenexacerbatedbytheshifttostreaming,
whichitclaimsgenerateslowerroyaltiesforcopyrightowners,356atopicthatis
addressednext.
b. Impact of Music Streaming Models

Amajorareaofdebateiswhetherdigitalmusicstreamingservicesfairlycompensate
rightsholders,particularlymusicpublishersandsongwriters.Digitalstreaming
providersassertthattheyprovidecopyrightownerswithentirelynewrevenuestreams
bypayingperformanceroyaltiestobothsoundrecordingandmusicalworkownersfor
LaPoltSecondNoticeCommentsat3([W]hilesynchronizationlicensesaremoreplentiful
thanever,theselicensesarepayinglowerandlowerratesperindividualagreementforthe
averagesongwriter.);NMPA&HFASecondNoticeCommentsat8(notingthatincreased
competitionhasdrivendownsynchfees);NSAISecondNoticeCommentsat6(Withhundreds
oftelevisionnetworksandonlinecontentproviderscomparedtojustafewyearsago,more
synchlicensesareissued,butforamuchloweramountperuse.).
353
SeeCFA&PublicKnowledgeFirstNoticeCommentsat6062(Theleadingedgeoftheshift
wasdrivenbyunbundlingofalbumsandthesaleofsingles.Consumerswerenolongerforced
tobuysongstheydidnotwantinordertogettheonestheydesired.);Tr.at274:0112(June23,
2014)(PaulFakler,NAB/MusicChoice)(Consumersnolongerareforcedtobuyabundled
albumcontainingrecordingsthattheydontwanttobuy.Sotherearealotoffactorsthathave
goneintodeclinesofrecordsales.).
354
IPACSecondNoticeCommentsat8;see alsoNSAISecondNoticeCommentsat6(Onemajor
reasonisdramaticallylessincomefromalbumcutsnotreleasedassingles.Afewyearsagoa
nonsinglecutonanalbumwithhighsalesvolumeproducedgreaterincomeformany
songwriters.Todayalbumcuts,withafewrareexceptions,produceverylittleincome.).
355
356
IPACSecondNoticeCommentsat89.
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interactiveandnoninteractiveservices.357Withrespecttosoundrecordingroyalties
specifically,DiMAnotedthat[d]igitalradioalonepaidout$590.4millioninroyaltiesto
artistsandrightsholderslastyear.358
Copyrightowners,aswellastheRIAA,acknowledgetheincreaseinperformance
royalties.359ASCAPandBMIinrecentyearshavebothannouncedrecordhigh
collectionsandroyaltydistributions.360Butnotwithstandingtheoverallincreasein
performanceroyalties,manycopyrightownersbelievethatthedownwardspiralof
recordsalesandthereforeartistandmechanicalroyaltieshasnotyetbeencompensated
bytheincreaseinstreamingrevenue.361Inotherwords,increasesinperformance
revenueshavenotmadeupforthedramaticdecreaseinsales.
Significantly,theleadinginteractivestreamingaudioservice,Spotify,believesthatthe
rapiddecline[inindustryrevenue]isnotduetoafallinmusicconsumptionbuttoa
shiftinmusiclisteningbehaviortowardsformatsthatdonotgeneratesignificantincome
forartists.362ASCAPobservedthattechnologicaldevelopmentshavesignificantly
increasedtheuseofmusicalworks,yetsignificantlydecreasedtheincomeearnedby
songwriters.363Songwritersincreasinglyworryabouttheirincome(orlackthereof)
DiMAFirstNoticeCommentsat45(Thesubstantialroyaltiespaidbydigitalmusicservices
constitutenewrevenuestreamsthatwereunimaginedjustafewdecadesago.).
357
358
Id.
RIAAFirstNoticeCommentsEx.Aat1(In2013,stronggrowthinstreamingrevenues
contributedtoaUSmusicindustrythatwasstableoverallat$7billionforthefourthconsecutive
year.);see alsoIFPI,DIGITALMUSICREPORT2014at5(TheUSmusicmarketcontinuedto
stabilize,growingslightlyintraderevenueterms,helpedbyrisingconsumerdemandformusic
streamingservices.).
359
BenSisario,Collectors of Royalties for Music Publishers May See Better Results,N.Y.TIMES(Sept.

23,2013),http://www.nytimes.com/2013/09/23/business/media/collectorsofroyaltiesformusic
publishersmayseebetterresults.html;PressRelease,ASCAP Reports Strong Revenues in 2013,
ASCAP(Feb.12,2014),http://www.ascap.com/press/2014/02132013financials.aspx.
360
ABKCOFirstNoticeCommentsat5;see also, e.g.,NMPASecondNoticeCommentsat7(noting

thatperformanceroyaltiesareincreasinginimportancewhilemechanicalincomehas
diminished.Almostallmusicalworkownersareinagreementthatthisisthemostchallenging
aspectofthenewdigitalmarketplace);RIAASecondNoticeCommentsat38;ASCAPSecond
NoticeCommentsat23(findingthatoverallsongwriterincomehasdeclinedbecause
mechanicalrightincomehasdroppedbyalargemargin.).
361
How is Spotify contributing to the music business?,SPOTIFY,http://www.spotifyartists.com/

spotifyexplained/#howisspotifycontributingtothemusicbusiness(lastvisitedJan.30,2015).
Spotifystates,however,thatitssubscriptionserviceaimstoregeneratethislostvalueby
convertingmusicfansfromthesepoorlymonetizedformatstoourpaidstreamingformat,which
producesfarmorevalueperlistener.Id.
362
363
ASCAPFirstNoticeCommentsat39.
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fromdigitalstreamingservices,especiallythosethattheyregardaspoorly
monetizedi.e.,adsupportedservicesthatdonotrequireasubscriptionfeeor
generatealargeamountofadvertisingrevenue.
Agrowingnumberofhighprofilesongwriter/artistsincludingTaylorSwiftandThom
YorkeareleveragingtheirsoundrecordingrightstoremovetheirmusicfromSpotify,
principallyoutofconcernthatSpotifysfreeadsupportedtierofservicedoesnotfairly
compensatethemfortheirsongs.364AsSwiftputitsuccinctly:Ithinkthatpeople
shouldfeelthatthereisavaluetowhatmusicianshavecreated,andthatsthat.365
SongwriterconcernsarevividlyillustratedbythefollowingtweetbyBetteMidler:
Othersongwritershavemadesimilarlybleakclaims.366Forinstance,thesongwriter
AloeBlaccrecentlyreported:
Seabrook,Revenue Streams: Is Spotify the Music Industrys Friend or Its Foe?;StuartDredge,Thom

Yorke Explains Why He Hates Spotify,BUSINESSINSIDER(Oct.7,2013),http://www.
businessinsider.com/thomyorkeexplainswhyhehatesspotify201310;SashaBogursky,Taylor
Swift, Garth Brooks and other artists lead the fight against Spotify,FOXNEWS(Nov.19,2014),
http://www.foxnews.com/entertainment/2014/11/19/taylorswiftgarthbrooksartistsleadfight
againstspotify/.
364
JackDickey,Taylor Swift on 1989, Spotify, Her Next Tour and Female Role Models,TIME(Nov.13,
2014),http://time.com/3578249/taylorswiftinterview.Inasimilarmove,GMRrecently
demandedthatYouTuberemovevideosfromitsservicecontainingapproximately20,000songs
thatGMRrepresents,includingtheEaglesandPharrellWilliams.EriqGardner,Pharrell Williams
Lawyer to YouTube: Remove Our Songs or Face $1 Billion Lawsuit,HOLLYWOOD REPORTER(Dec.22,
2014),http://www.hollywoodreporter.com/thresq/pharrellwilliamslawyeryoutuberemove
759877.
365
See, e.g.,MayaKosoff,Pharell Made Only $2,700 In Songwriter Royalties From 43 Million Plays of
Happy On Pandora,BUSINESSINSIDER(Dec.23,2014),http://www.businessinsider.com/pharrell
madeonly2700insongwriterroyaltiesfrom43millionplaysofhappyonpandora201412;
DavidLowery,My Song Got Played On Pandora 1 Million Times and All I Got Was $16.89, Less Than
366
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AviciisreleaseWakeMeUp!thatIcowroteandsing,forexample,was
the most streamed song in Spotify history and the 13th most played song
on Pandora since its release in 2013, with more than 168 million streams
in the US. And yet, that yielded only $12,359 in Pandora domestic
royaltieswhich were then split among three songwriters and our
publishers.Inreturnforcowritingamajorhitsong,Iveearnedlessthan
$4,000domesticallyfromthelargestdigitalmusicservice.367
Notably,songwriterswhoarenotalsorecordingartistswithsomemeasureofcontrol
overtheirrecordingstypicallydonothavetheoptiontowithdrawtheirworksfrom
lowpayingservices,becauseduetothecombinationofthesection115compulsory
licenseandtheASCAPandBMIconsentdecreestheyhavenochoiceotherthanto
permittheexploitationoftheirmusicalworksbysuchproviders.Andevenrecording
artistscannotremovetheirmusicfromnoninteractivedigitalserviceslikePandorathat
qualifyforthesection112and114compulsorylicenses.
Fortheirpart,thedigitalmusicservicesdenythattheyarethecauseofthedeclinein
songwriterincome.Theseservicesnotethattheypayroyaltiesforthepublic
performanceofsoundrecordings,whileterrestrialradiodoesnot,andsothetotal
royaltiestheypaytobothsoundrecordingandmusicalworkownersmustbe
considered.368Accordingly,PandorachallengedthenumberscitedbyMidlerandBlacc
bypublicizingthetotalamountspaidforallrightstoperformthesongs,including
soundrecordingrightsstatingthattheypaid$6,400inroyaltiesinMidlerscaseand
over$250,000fortheplaysofWakeMeUp!.369
Digitalmusicservicesemphasizethattheypaythelionsshareoftheirrevenuesoverto
rightsowners,370andsuggestthatthesongwriterconcernsaremoreaccuratelytracedto
What I Make From a Single TShirt Sale!,THETRICHORDIST(June24,2013),http://thetrichordist.
com/2013/06/24;DougGross,Songwriters: Spotify doesnt pay off . . . unless youre a Taylor Swift,
CNN(Nov.13,2014),http://www.cnn.com/2014/11/12/tech/web/spotifypaymusicians(noting
thatthesongwritersoftheBonJovihitLivinonaPrayersplit$110inroyaltiesfromPandora
for6.5millionplaysofthatsong).
AloeBlacc,Streaming Services Need to Pay Songwriters Fairly,WIRED(Nov.5,2014),
http://www.wired.com/2014/11/aloeblaccpaysongwriters.
367
368
AndyGensler,Bette Midler Disparages Pandora, Spotify Over Artist Compensation,BILLBOARD
(Apr.6,2014),http://www.billboard.com/biz/articles/news/digitalandmobile/6039697/bette
midlerdisparagespandoraspotifyoverartist;AlisonKosik,The puzzling and antiquated world of
music royalties,CNNMONEY(Nov.17,2014),http://money.cnn.com/2014/11/17/media/aloeblacc
musicroyalties.
369
DiMAFirstNoticeCommentsat46;see alsoGlennPeoples,Pandora Revenue Up 40 Percent,
Listening Growth Softens,BILLBOARD(Oct.23,2014),http://www.billboard.com/biz/articles/news/
370
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thedivisionoftotalroyaltiesbetweensoundrecordingownersandmusicalwork
owners.371Fromtheservicesperspective,totalcontentcostsaretherelevant
consideration.Theyassertthattheyareagnosticastohowthattotalisdividedamong
variousrightsholders.372
Digitalmusicservicesandbroadcastersalsocontendthat,totheextentindividual
creatorsbelievetheyarenotreceivingadequateincome,theblamemightliewith
intermediaries.DiMAstatedthatthereislittletransparencyaboutwhathappenstothe
significantroyaltiesgeneratedfromdigitalmusicservicesaftertheyarepaid torecord
labels,musicpublishers,andPROs,andprocessedunderthefinancialtermsof
recordingartistsandsongwritersownprivatearrangementswithrightsowners.373
DiMAthusallegedthat,ratherthanbeingpaidouttoindividualcreators,asignificant
portionoftheroyaltiesreceivedareretainedby[intermediaries]fortheirownaccount,
orappliedtowardtherecoupmentofadvancespaidtorecordingartistsand
songwriters.374SAGAFTRAandAFM,whichrepresentindividualartists,expresseda
similarworrythatdirectlicensingdealscancreateuncertaintyregardingwhich
benefitsofthedealaresubjecttobeingsharedwithArtistsatall.Theynotedin
particularthat[d]irectlicensedealsincreasinglyhavebeenreportedtoinclude
breakageadvancepaymentsorguaranteedpaymentsinexcessoftheper
performanceroyaltyearnedunderthelicenseequityshares,promotionorothernon
usagebasedelementsandthatevenifsuchamountsaresharedwithartists,theymay
digitalandmobile/6296383/pandorarevenueup40percentlisteninggrowthsoftens(noting
Pandorapays46.5%ofitsrevenuesinroyaltiestocopyrightowners).
SeeDiMAFirstNoticeCommentsat11([M]uchofthecurrentdebateoverratesstemsfrom
disagreementamongthelabels,publishersandPROsabouthowtoallocatethecontent owners
fixed share of the pie,ratherthanfromanotionthatserviceprovidersarenotpayingenough,inthe
aggregate,forcontent.).
371
SeeTr.at193:1318(June4,2014)(ScottSellwood,Google/YouTube)([I]ftherecouldbesome
agreementbetweenpublishersandlabelsastototalcontentcost,wedontwereveryagnostic,
wedontcarewhetheritsaperformanceorareproduction,tellushowmuchitcosts.);accord Tr.
at112:02113:08(June17,2014)(VickieNauman,CrossBorderWorks)([Thirdpartytechnology
developers]incentivesarenottosolvetheproblemsbetweenthepublishersandthelabelsand
thePROs...[T]heywanttoknowthattheycancometoasimplesourceandpayfortherights.).
372
373
Id.;see also NABFirstNoticeCommentsat1012(Totheextentrecordingartistshavenotbeen

adequatelysharinginthenewrevenuestreamsfromondemandstreamingservices...itislikely
duetothesesamecreativeaccountingschemesthattherecordcompanieshaveemployedfor
decadestounderpayartists.).
374
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U.S.CopyrightOffice
besubjecttorecoupmentandlesstransparentthanpaymentsunderthecompulsory
license.375
c. NonPerforming Songwriters
Whileallcreatorshavebeenaffectedbytheshiftfromfullalbumsalestodigital
streamingmodels,songwriterswhoarenotalsoperformingartistsappeartohavebeen
especiallyhardhit.Unlikesongwriterartists,puresongwriterswhowriteworksfor
otherstoperformdonothavethepotentialtomakeupforlostincomethroughtouring
ormerchandisesales.
AccordingtoNSAI,since2000,thenumberoffulltimesongwritersinNashvillehas
fallenby80%.376NSAIfurtherobservesthattwodecadesago,thereweresome3,000to
4,000publishingdealsavailableforsongwritersinNashville;thatnumberhassince
droppedto300to400.377Apublishingdealiscrucial,asitessentiallypaysasongwriter
anannualsalarytowritesongs.378Withoutsuchadeal,itmaybeimpossiblefora
songwritertofinancehisorhercreativeefforts.ArecentarticleinThe Tennessean
concludesthattheresultoftheshiftawayfromalbumsalestostreaminghasbeenthe
collapseofNashvillesmusicalmiddleclass.379
d. Additional Considerations
Piracy
Inaddition,abroadrangeofstakeholderswiththeexceptionoftheCFAandPublic
Knowledge380pointedtopiracyasacontinuingchallengethatdepressesrevenuesfor
bothlegalmusicprovidersandrightsholders.Butpiracywasnotasignificantfocusof
discussion.UnlikeintheNapsterera,stakeholdersnowseemresignedtothis
marketplaceconditionandtheperhapsirreversibleimpactithashadontheindustry.
RIAAwhichabandoneditslawsuitsagainstindividualfilesharersseveralyears
ago381observedthatpiracycertainlyisinthebackgroundwhenyoutalkabout
whetherdigitalmusicservicesareearningenoughmoneyorpayingenoughmoney,
375
SAGAFTRA&AFMSecondNoticeCommentsat2.
376
Rau,Nashvilles musical middle class collapses.
377
378
Rau,Nashvilles musical middle class collapses.
379
Id.
CFA&PublicKnowledgeFirstNoticeCommentsat70(Intodaysmusicmarket,theclaim
thatpiracyisstillaproblemiscontradictedbyagreatdealofevidenceonactualconsumer
behavior.).
380
DavidKravets,Copyright Lawsuits Plummet in Aftermath of RIAA Campaign,WIRED(May18,

2010),http://www.wired.com/2010/05/riaabump/.
381
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U.S.CopyrightOffice
competingagainstfreeremainsaproblem.382DiMAagreedthatthetruthisthatany
legitimatedigitalservicerightnowcompeteswithfree.383Thissentimentwasechoed
bySpotifyaswell:Wearecompetingwithpiracy.Itsarealitythatweallfaceonevery
leveloftheecosystem.Weareallcompetingwithfree.384
Impact of DMCA Safe Harbors
Whilepiracymaynowbeconsideredasanacceptedbackgroundfact,thesamecannot
besaidoftheDMCAsafeharbors,codifiedinsection512oftheCopyrightAct,which
remainhighlycontroversial.Section512curtailsliabilityforonlineprovidersfor
infringinguserpostedcontentprovidedthattheyremovesuchcontentexpeditiouslyin
responsetoacopyrightownerstakedownnotice.385Althoughtheoperationofthe
DMCAsafeharborsisbeyondthescopeofthisstudy,theOfficebrieflynotesthese
DMCAconcernssincetheyweresofrequentlyexpressed.386
ManycopyrightownersblametheDMCAssafeharborregimeforallowingdigital
providerstheopportunitytoprofitfromtheunauthorizeduseofcopyrightedmusic
withoutpayinglicensingfees.387Onecomposer,HlneMuddiman,likenedthe
situationtoacompanygivingawaysomeoneelsesCDsatafairgroundandmaking
moneybyadvertisingtothepeopleinline.388MusicpublisherJasonRyscontendedthat
Tr.at98:0204(June24,2014)(SusanChertkoff,RIAA);see also RIAASecondNoticeComments
at6(Itremainsaproblemthatthelegitimatemarketforlicensedmusicalworksmustoperatein
anenvironmentinwhichthereisalsoahugeamountofinfringinguse.).
382
383
Tr.at111:0911(June24,2014)(LeeKnife,DiMA).
384
Tr.at122:0104(June24,2014)(JamesDuffettSmith,Spotify).
17U.S.C.512(c);DMCA202(a).
385
Inaseparatepublicprocess,theDepartmentofCommercesInternetPolicyTaskForceled
bytheU.S.PatentandTrademarkOffice(USPTO)andtheNationalTelecommunicationsand
InformationAdministration(NTIA)has,inkeepingwithitsJuly2013GreenPaper,
establishedamultistakeholderdialogueonimprovingtheoperationofthenoticeand
takedownsystemforremovinginfringingcontentfromtheInternetundertheDMCA.See
RequestforCommentsonDepartmentofCommerceGreenPaper,CopyrightPolicy,Creativity,
andInnovationintheDigitalEconomy,78Fed.Reg.61,337,61,338(Oct.3,2013);see also
DEPARTMENTOFCOMMERCEINTERNETPOLICYTASKFORCE,COPYRIGHTPOLICY,CREATIVITY,AND
INNOVATIONINTHEDIGITALECONOMY54(2013)(GREENPAPER),available at
http://www.uspto.gov/news/publications/copyrightgreenpaper.pdf.TheOfficewillbeinterested
toseetheresultsofthatprocess.
386
387
See LincoffFirstNoticeCommentsat9.
Tr.at136:10139:05(June17,2014)(HlneMuddiman,HollywoodEliteComposers);see also
ZoKeating,What should I do about Youtube?,ZOEKEATING.TUMBLER.COM(Jan.22,2015)
http://zoekeating.tumblr.com/post/108898194009/whatshouldidoaboutyoutube(describing
YouTubesnegotiatingtacticsforlicensescoveringitsnewsubscriptionservice,whichinclude
388
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U.S.CopyrightOffice
duetotheDMCAtheresnothingyoucanrealisticallydotostopyoursongsfrom
appearingonYouTube.389
Inadditiontocomplainingthatthenoticeandtakedownregimecreatedunderthe
DMCAresultsinanimpossiblegameofwhackamolesinceremovedcontentis
frequentlyreposted,requiringtheownertoserveanothertakedownnotice390some
stakeholdersalsopointoutthatthedigitalcompaniesabilitytoexploitinfringing
contentunlessanduntilanoticeissentaffordstheseproviderssignificantadded
leverageinlicensingnegotiations,sincecontentownersmusteitheragreetoalicenseor
devotesignificantresourcestoanunendingtakedownprocess.Thisdynamic,inturn,is
thoughttohaveadepressiveeffectonroyaltyrates.391
Fortheirpart,digitalservicesstresstheconsiderableeffortthatisrequiredtorespondto
copyrightownersslewoftakedownnotices.Thenumberoftakedownrequests
submittedtoGoogle,forexample,continuestoclimbandsuggestsastaggeringamount
ofonlineinfringement.In2010,Googlereceivedapproximately3millionDMCA
takedownrequests;in2014,thatnumberwas345millionover940,000takedown
requestseveryday.392
excludingartistsfromYouTubesrevenuesharingprogramiftheartistdeclinestolicensetheir
worksforthesubscriptionservice).
Trat228:0810(June16,2014)(JasonRys,WixenMusicPublishing);see Trat119:1021(June
24,2014)(DickHuey,ToolshedInc.)(theDMCAisadefensethatsusedbythelargesttech
companiesinsomecasestoavoiddirectlicensing).
389
AudiosocketFirstNoticeCommentsat1;BuckleySecondNoticeCommentsat4;DotMusic
FirstNoticeCommentsat8.
390
BMIFirstNoticeCommentsat2829(Anotherexplanation[forreducedsongwriter,composer
andrecordingartistincome]isthedepressiveeffectofthe[DMCA]safeharbors,whichshield
Internetserviceproviders...fromliabilityforcertainuseractivities.).Tocitearecentexample,
IrvingAzoffofGMRrecentlythreatenedlitigationagainstYouTubefortheunauthorized
performancesofhisclientsmusicnotwithstandingthesafeharbors,explainingthattheyarethe
onesthathavebeenleastcooperativeandthecompanyourclientsfeelaretheworstoffenders.
Gardner,Pharrell Williams Lawyer to YouTube: Remove Our Songs or Face $1 Billion Lawsuit.GMRs
apparentpositionisthatifYouTubeisabletoidentifymusicforthepurposeofmonetizingit
throughitsContentIDsystem,itshouldalsobeabletotakeitdownwithouttheserviceof
individualtakedownnotices.Id.
391
JoeMullin,Google Handled 345 Million Copyright Takedowns in 2014,ARSTECHNICA(Jan.6,

2015),http://arstechnica.com/techpolicy/2015/01/googlehandled345millioncopyright
takedownsin2014;Section 512 of Title 17: Hearing Before the Subcomm. On Courts, Intell. Prop., and
the Internet of the H. Comm. on the Judiciary,113thCong.47(2014)(StatementofKatherineOyama,
Sr.PolicyCounsel,GoogleInc.).
392
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2. Disparate Treatment of Analogous Rights and Uses

Closelytiedtotheissueoffaircompensationisthedisparatelegaltreatmentofsound
recordingsandmusicalworks,bothvisviseachotherandacrossdifferentdelivery
platforms.Manyparticipantsregardthesedisparitiesasunwarranted,andblamethem
fortheunfairnessandinefficiencyinthemusiclicensingsystem.
a. Inconsistent Ratesetting Standards

Asexplainedabove,ratesettingstandardsunderthestatutorylicensesandconsent
decreesdifferbasedontherightanduseatissue.TheCRBestablishesratesfor
mechanicalreproductionsofmusicalworksundersection115underthefourfactor,
publicpolicyorientedstandardinsection801(b)(1)oftheCopyrightAct.393Underthe
ASCAPandBMIconsentdecrees,theratecourtsestablishratesforthepublic
performanceofmusicalworksunderafairmarketvalueanalysiswhichattemptsto
determinethepricethatawillingbuyerandwillingsellerwouldagreetoinanarms
lengthtransaction,butgivessubstantialweighttoantitrustconcerns.394
Asalsodescribedabove,ratesforthedigitalperformanceofsoundrecordingsunder
section114aresetunderdifferentstandards,dependingonthetypeofuse.Royalty
ratesforalimitedsetofolderservicesSiriusXM,astheonlypreexistingsatellite
service,andMusicChoiceandMuzak,astheonlypreexistingsubscriptionservicesare
governedbythesamefourfactorstandardinsection801(b)(1)asmechanical
reproductionsofmusicalworkssubjecttocompulsorylicensingundersection115.395
Meanwhile,royaltyratesforallinternetradioandnewernoninteractivesubscription
services,andforallephemeralrecordingsundersection112regardlessofthetypeof
service,areestablishedunderthesocalledwillingbuyer/willingsellerstandard,
whichmanybelieveyieldsmoremarketorientedratesthanthoseestablishedunder
section801(b)(1).396
Moststakeholdersseemtoacknowledgethatitisproblematicforthelawtoimpose
differingratesettingstandards,especiallyforbusinessesthatprovidesimilarservices.397
393
17U.S.C.801(b)(1).
ASCAPFirstNoticeCommentsat25(quotingUnited States v. BMI(Music Choice II),316F.3d

189,194(2dCir.2003));ASCAP v. MobiTV, Inc.,681F.3d76,82(2dCir.2012)(statingthatthe
ratesettingcourtmusttakeintoaccountthefactthatASCAP,asamonopolist,exercisesmarket
distortingpowerinnegotiationsfortheuseofitsmusic).
394
395
See17U.S.C.114(f)(1),801(b)(1).
396
See 17U.S.C.112(e)(4),114(f)(2)(B).
See,e.g., SoundExchangeFirstNoticeCommentsat68,1416;DiMAFirstNoticeCommentsat
40;RIAAFirstNoticeCommentsat3032;PublicKnowledge&CFAFirstNoticeCommentsat
2326;SiriusXMFirstNoticeCommentsat3;NARASFirstNoticeCommentsat89.
397
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U.S.CopyrightOffice
AsDiMAnoted,[t]heplayingfieldregardingratesettingstandardsisnotlevel,and
theresultisfundamentalinequity.398Dependinguponwhethertheywishtoseehigher
orlowerroyaltyrates,however,thesesamestakeholdersdisagreeastowhichratesetting
standardshouldapply.
Musicservicesandpublicinterestgroupssupportadoptionofthe801(b)(1)standardfor
allstatutorylicenses,asthestandardmorelikelytoproducelowerrates.Public
KnowledgeandCFA,forexample,opinedthatthe801(b)(1)standardsbalancingof
policyconsiderationsandfocusoncreatingeconomicincentiveswiththeultimate
purposeofencouragingartistsandplatformstocreatenewworksandbringthose
workstomarketbetteralignswiththeconstitutionalpurposeofcopyrightlaw.399
Similarly,SiriusXMpointedoutthatthe801(b)(1)standardprovidedmorelatitudeto
considertheenumeratedpolicyfactors,includingrecognizingtherelative
contributionsoftechnologicalpioneers,andensuringthatbothcopyrightownersand
usersaretreatedfairly.400Italsonotedthatratessetunderthestandardhaveproven
lesssusceptibletolegalchallengeorcongressionalmodification.401
Takingasomewhatdifferenttack,DiMAcriticizedthewillingbuyer/willingseller
standardforrequir[ing]judgestosetaratebasedsolelyonmarketplace benchmarks,
wherethereisverylittlerecordevidenceofmarketratesfordirectlylicensedinternet
radioservicesthatarenottiedtoaseparaterightsgrantforadditionalservicetypesand
functionalities(suchasdirectlicensesforinteractiveservices).402Inarelatedvein,
Spotifynotedthatunderthewillingbuyer/willingsellerstandard,benchmarkrates
profferedbylicenseesareoftenpremisedontheagreementsenteredintobyonlythe
largestoflicensors...[who]demandMostFavoredNationsprovisionstoensurethat
onlythehighestratesareutilizedinthemarketasopposedtoratesthatwouldarise
fromtruefreemarketnegotiations.403
Incontrast,copyrightownersandtheirrepresentativessupporttheadoptionofthe
willingbuyer/willingsellerstandardforallratesacrosstheboard.Theypositthatthe
willingbuyer/willingsellerstandardisfairertomusicownersandcreators,whocannot
optoutofcompulsorylicenses.404BMIstatedthatitissimpleandselfevidentthat
398
PublicKnowledge&CFAFirstNoticeCommentsat2425.
399
SiriusXMFirstNoticeCommentsat13.
400
Id.at1415.
401
DiMAFirstNoticeCommentsat36(emphasisinoriginal).
402
SpotifyFirstNoticeCommentsat7.
403
See,e.g., NMPA&HFAFirstNoticeCommentsat8,1516;WixenFirstNoticeCommentsat2;
BMIFirstNoticeCommentsat3;IPACFirstNoticeCommentsat6;NARASFirstNotice
Commentsat1;Tr.at292:1720(June24,2014)(PeterBrodsky,Sony/ATV).
404
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U.S.CopyrightOffice
creatorsshouldbepaidatafairmarketvaluerate.405Sony/ATVarguedthatthe
801(b)(1)standardcreatesartificiallydeflatedrights,whereasawillingbuyer/willing
sellerstandardwillcreatefairmarketvalueforcopyrightowners.406Insum,
copyrightownersstronglyobjecttoaratesettingstandardthatdoesnotaspiretofree
marketrates.
Inthisregard,anumberofcopyrightowners,includingNMPA,ASCAP,BMI,SESAC,
andNARAS,expressedsupportfortheSongwriterEquityAct(SEA),proposed
legislationthatwouldchangetheratesettingcriteriaapplicabletosection115fromthe
801(b)(1)formulatothewillingbuyer/willingsellerstandard.407
b. Different Ratesetting Bodies

Anotherdisparityintheratesettingprocessinvolvesthebodiesthatoverseethe
ratesettingproceedings.Asdiscussedabove,antitrustconsentdecreesenteredintowith
theDOJbyASCAPandBMIdictatethatratessetforthepublicperformanceofmusical
worksadministeredbythosePROsareoverseenbytwojudgesoftheU.S.DistrictCourt
fortheSouthernDistrictofNewYorkthatsitasratecourtsfortherespectiveconsent
decrees.Antitrustconcernsplayapredominantroleinthesettingoftheserates.408In
contrast,theCRB,whichsetsratesforthestatutorylicensesinsections112,114,and115,
doesnotsetrateswithantitrustconcernsspecificallyinmind.409Instead,theCRBis
designedtobeanexpertratesettingbody,andtobringtobearasignificantmasteryof
economicsandmarketplacefactorsaswellasconsiderableknowledgeofcopyright
law.410
Anumberofstakeholderscriticizedthisdividedratesettingregime.Licenseespointed
outthatsimilarservicesmustpetitiondifferentbodiestoobtaintherightsnecessaryto
engageinasingleactivityforexample,interactivestreamingleadingtoincreased
costs.Whenratesaresetbydifferentbodiesatdifferenttimes,thereisaquestionasto
405
406
Tr.at291:0407(June24,2014)(PeterBrodsky,Sony/ATV).
SEA,H.R.4079,113thCong.(2014);see alsoSongwriter Equity Act Gains Support in Congress,
BMI,http://www.bmi.com/news/entry/songwriter_equity_act_gains_support_in_congress(last
visitedJan.30,2015).TheSEAwouldalsoeliminatethecurrentprohibitioninsection114(i)that
prohibitsthePROratecourtsfromconsideringsoundrecordingperformanceratesin
establishingtheperformanceroyaltiesdueformusicalworks.
407
BMI v. DMX,683F.3dat49.
408
Indeed,asnoted,Congressprovidedcopyrightownersanduserswithanantitrustexemption
toallowthosegroupstoengageincollectivenegotiationofratesunderthestatutorylicenses.See
17U.S.C.112(e)(2);114(e)(1),115(c)(3)(B).
409
H.R.REP.NO.108408,at25;see generally17U.S.C.802(a).
410
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howtoadjustandharmonizethedifferentrates.411Othersraisedfundamentalstructural
andproceduralconcerns,suchastheproprietyofasingledistrictcourtbeingtasked
withanongoingeconomicresponsibilityitisnotspecificallydesignedtohandle,in
comparisontoadedicatedtribunalsuchastheCRB.BobKohn,authorofawellknown
treatiseonmusiclicensing,notedthatratecourtproceedingshavemorphedfromthe
natureofafairnesshearingforproposedratestoanactualratesettingprocess
somethingwhichthecourtsarenotequippedtodo,especiallywithoutjurisdictionover
ratesettingformechanicalreproductionsofmusicalworksandtransmissionsofsound
recordings.412
Musicservicesfearthatfragmentedconsiderationofroyaltyratesacrossdifferent
ratesettingbodiescanleadtounsustainableresults.413Onthispoint,arepresentative
fromSpotifystated:
Onethingthatisabsolutelyessential,though,isthatanyratesetting
standardisnotlookedatinavacuum....Ifwehaveanincreasein
publishingrates,forexample,thatgoupbeyond,muchhigherthanthey
areatthemoment,thenwecouldbeinasituationwherewepayout
morethanonehundredpercentofourrevenue,whichisunsustainable.414
Addingtogeneralconcernsaboutdisparateratesettingprocessesisthefactthatsection
114(i)oftheCopyrightActpreventsthePROratecourtsfromconsideringfeessetbythe
CRBfordigitalperformanceofsoundrecordings,thusfurtherencouraging
balkanization.415
Recognizingtheshortcomingsinherentinthecurrentdividedapproach,some
participantsproposedunifyingratesettingproceedingsformusiclicensinginasingle
body,observingthatthiscouldalsoleadtocostsavingsthroughtheeliminationof
duplicativeproceedings.416
Tr.at237:0821(June16,2014)(GaryR.Greenstein,WilsonSonsiniGoodrich&Rosati).
411
KohnFirstNoticeCommentsat12.
412
Tr.at194:0518(June4,2014)(ScottSellwood,Google/YouTube)([T]hemainconcernforus
thatcomesfromfragmentationisanincrementalcreepintotalcontentcostfromwhichwecant
reallysustainthebusiness.).RIAA,however,likenedthisconcerntosayingifDunkinDonuts
findsoutthatthepriceofcoffeeisgoingupthatnowtheyaregoingtotelltheirfloursupplier
thattheyaregoingtopayless.Tr.at98:1219(June24,2014)(SusanChertkoff,RIAA).
413
Tr.at258:0114(June23,2014)(JamesDuffettSmith,Spotify).
414
See NMPA&HFAFirstNoticeCommentsat2122;BMIFirstNoticeCommentsat12;SESAC
FirstNoticeCommentsat35;NARASFirstNoticeCommentsat4;CTIAFirstNoticeComments
at1112;Tr.at268:11269:14(June16,2014)(TimothyA.Cohan,PeerMusic).
415
SeeFMCFirstNoticeCommentsat4(suggestingthatitmaybemoreusefultohave
arbitrationanddisputeresolutionmechanismstakeplaceunderthesamecourt,perhapsthe
416
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U.S.CopyrightOffice
c. Pre1972 Sound Recordings

Asexplainedabove,legaluncertaintiessurroundstatelawprotectionforpre1972sound
recordings.Thishasleddigitalmusicproviderstotakedifferentapproachesastothe
paymentofroyaltiesforthestreamingofpre1972soundrecordingssomepay,and
somedonot.Inrecentmonths,questionsofwhetherandhowtopayforsuchuseshave
becomemoreimmediateduetojudicialdecisionsinCaliforniaandNewYorkupholding
therightofpre1972soundrecordingownerstocollectforperformancesoftheir
worksandadditionallawsuitsarepending.417
Asageneralmatter,somestakeholderssupportthefullfederalizationofsound
recordingsi.e., thetotalinclusionofpre1972soundrecordingswithinthefederal
CopyrightAct,subjecttoexistingexceptionsandlimitationswhileothershavefavored
amorelimitedsolutionthatwould,forexample,provideapaymentmechanismunder
thesection112and114licensesfornoninteractivedigitalserviceswithasafeharbor
fromstateliability.Inaddition,itseemsthatsomeparties,particularlydigitalmusic
services,mightbecontenttooperatewithoutafederalstatutoryobligationto
compensatepre1972soundrecordingowners.Butthesestakeholdersatleast
acknowledgethatafederallicensingschemewouldbepreferabletoobtainingdirect
licensesunderscatteredstatelawsforeachsoundrecordingperformed,whichisno
longermerelyahypotheticalscenario.418
Full Federalization Considerations
FullfederalizationmeansthatallrightsandlimitationsintheCopyrightActapplicable
topost1972soundrecordingswouldalsoapplytopre1972soundrecordings.419The
CopyrightOffices2011reportonthetreatmentofpre1972recordingsrecommendsfull
federalization.Specifically,theOfficeconcludedthatthisapproachwouldimprovethe
certaintyandconsistencyofcopyrightlaw,willlikelyencouragemorepreservationand
accessactivities,andshouldnotresultinanyappreciableharmtotheeconomicinterests
ofrightholders.420
CopyrightRoyaltyBoard);LincoffFirstNoticeCommentsat411(proposingaunifieddigital
transmissionrightencompassingrightsofmusicalworksandsoundrecordingownerswith
ratessetbytheCRB).
Thedecisionscamedownshortlyafterthecloseoftherecordinthisstudy,soitispossiblethat
stakeholderspositionsastohowourlicensingsystemshouldhandlepre1972recordingshave
evolvedsomewhatfromtheirearlierexpressedviews.
417
418
See, e.g.,DiMAFirstNoticeCommentsat39;MusicChoiceFirstNoticeCommentsat1316.
419
SeePRE1972SOUNDRECORDINGSREPORTatix.
420
Id.
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U.S.CopyrightOffice
ArangeofstudyparticipantsagreewiththeOfficesview.421Theprospectofreceiving
federallyrequiredcompensationforpre1972exploitationsisadriverforsome;NARAS,
whichlargelyagreedwiththeOfficesfindings,observedthatolderartists,who
contributedgreatlytoournationsculturallegacy,oftenrelyontheirrecordingsastheir
solesourceofincome.422OthersconsideraccesstothefullspectrumoftheCopyright
Actsrightsandlimitationstobeanimportantelementofanysolution.Somecreatorsof
pre1972soundrecordings,forinstance,believetheyshouldhaveaccesstofederal
terminationrights.423TheLibraryofCongress(whichsubmittedcommentsasan
interestedparty)worriedthatpreservingmillionsofhistoricmusicandsound
recordingswillbeimpossibleunderthecurrentregime,wherepre1972recordings
aresubjecttoavarietyofdisparatestatelawsandstatecommonlawthat...lack
statutorylanguagetoexemptarchivalcopyingforpreservationpurposes.424Others,
includingdigitalmusicservices,feelstronglythatthefairusedoctrineandDMCAsafe
harborprovisionsshouldapplytopre1972recordings.425
Partial Federalization Alternative
Supportersofpartialfederalization,whileopentoconsiderationofabroadersolution,
believethatameasurerequiringcompensationforuseofpre1972soundrecordings
See, e.g., KernochanCenterSecondNoticeCommentsatpassim;BrighamYoungUniversity

CopyrightLicensingOffice(BYU)FirstNoticeCommentsat3;FMCFirstNoticeCommentsat
810;KohnFirstNoticeCommentsat1415;LibraryofCongressFirstNoticeCommentsat24;
PublicKnowledgeSecondNoticeCommentsat35;Tr.at164:22165:02(June17,2014)(Eric
Harbeson,MusicLibraryAssociation).
421
422
See, e.g.,id.at78;Tr.at154:11154:21(June5,2014)(RobertMeitus,MeitusGelbertRoseLLP).
But seePRE1972SOUNDRECORDINGSREPORTat14849(recommendingagainstfederal
terminationrightstoexistinggrants,butsupportingsuchrightsforgrantsmadeaftereffective
dateoffederalizationlegislation).Withrespecttoolderrecordingsthatfallwithinthescopeof
federalprotection,oneparticipantsuggestedprovidingauthorsofsoundrecordingswiththe
opportunitytorecapturetheircreationsiftherecordlabelsstopexploitingtheworks
commercially.RinkermanSecondNoticeCommentsat2.Accordingtotheproposal,theserights
wouldincentivizethecontinuedavailabilityofworksandpreventworksfromlanguishingin
limbobasedonperceptionsofmarketability.Id.RIAArespondedthat,sincedigitalmusic
platformsmakeiteasiertoreissueobscurerecordingswithoutthecostsassociatedwithphysical
distribution,ownersdonotneedadditionalincentivetoexploitcommerciallyviableworksunder
theircontrol.Tr.at211:16212:09(June24,2014)(SusanChertkof,RIAA).
423
424
LibraryofCongressFirstNoticeCommentsat23.
DiMAFirstNoticeCommentsat39;BYUFirstNoticeCommentsat3.ThoughDiMAtakes
noviewonthefederalizationissue,itclaimsthat,totheextentCongressconsidersincorporating
pre1972soundrecordingsintofederalcopyrightlaw,suchachangeshouldbeabsoluteand
full.Tr.at157:0518(June5,2014)(LeeKnife,DiMA).
425
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U.S.CopyrightOffice
shouldbeenactedinthenearterm.426SoundExchangeexplainedthatfullfederalization
wouldraiseanumberofcomplicatedissues,butresolvingthoseissuesshouldnot
delayprovidinglegacyartistswithfaircompensationfortheuseoftheirworks.427
SoundExchangenotedinparticularthattheartistswhocreatedpre1972recordingsare
especiallydependentondigitalrevenuestreams,becausetheyareoftenlesslikelythan
morecurrentartiststobeabletogeneratesignificantincomefromtouring,productsales
andothersources.428Forthosewhosupportsuchanapproach,obtainingroyaltiesfrom
digitalperformanceservicesisofprimaryimportanceandpartialfederalizationshould
beimplementedasashorttermsolutionwhileissuesoffullfederalizationcontinueto
bedebated.429
Accordingly,somestakeholdersadvocatedforCongresstosimplyexpandthesection
112and114statutorylicensingschemetoencompasspre1972soundrecordings.
Accordingtotheseparties,bringingpre1972soundrecordingswithinthescopeof
federalcopyrightprotectioninthismannerwouldsupplydigitalmusicserviceswithan
easymeanstoofferlawfulpublicperformancesofthoserecordingswhilegenerating
newsourcesofrevenueforcopyrightowners.430Proponentsofpartialfederalization
havesupportedCongressadoptionoftheRespectingSeniorPerformersasEssential
CulturalTreasuresAct(otherwiseknownastheRESPECTAct),legislationintroduced
in2014thatwouldextendthesection112and114licensestocoverpre1972recordings
butatthesametimeprovideprotectionfromstatelawliabilityforsuchuses.431
d. Terrestrial Radio Exemption

Asexplainedabove,currentlawdoesnotrequiretraditionalterrestrialoroverthe
airradiobroadcasterstocompensatesoundrecordingownersforthepublic
performanceoftheirrecordings.432Digitalmusicservices,bycontrast,mustpayboth
soundrecordingownersandmusicalworkownersforperformances.TheCopyright
Officehaslongsupportedafullpublicperformancerightforsoundrecordings.
Recordingartistsandrecordlabelsarguethattheyareentitledtocompensationfrom
terrestrialradiostationsinthesamewaythatsongwritersandpublishersreceive
See, e.g.,A2IMFirstNoticeCommentsat78;ABKCOFirstNoticeCommentsat3;RIAAFirst
NoticeCommentsat3233;see alsoNARASFirstNoticeCommentsat68(supportingpartial
federalizationasastopgap).
426
427
SoundExchangeFirstNoticeCommentsat1113.
428
Id.at1112.
429
Tr.at180:1114(June24,2014)(CaseyRae,FMC).
See LaPoltFirstNoticeCommentsat10(Recordingartistswithpre1972recordingswere
deniedanestimated$60millioninroyaltiesin2013alone.).
430
431
RESPECTAct,H.R.4772,113thCong.(2014).
432
17U.S.C.106(4),106(6),114(a).
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compensationwhentheirsongsareplayedontheradio.433Theycharacterizethe
terrestrialbroadcastexemptionasanantiquatedloopholethatcausesglaring
inequity.434Theybelievethattheterrestrialradioindustrydoesnotadequately
compensatesoundrecordingownersforhelpingtogeneratebillionsofdollarsinannual
advertisingrevenuesforradioservices.435Inthisregard,theyassertthatthe
promotionaleffectofradioairplayonrecordsalesclaimedbybroadcastersisoverstated,
andthatsoundrecordingownersshouldnotbeforcedtoforgocompensationin
exchangeforthesuggestionofpromotionalvalue.436
Inaddition,copyrightownersanddigitalstreamingservicestogetherurgethatcurrent
lawgivesterrestrialradiounwarrantedcompetitiveadvantageovernew,innovative
entrants.437Theynotethatwirelesscommunicationstechnologieshaveimprovedtothe
pointwheredigitalservicesarecompetingdirectlywithtraditionalterrestrialradio,and
consumersareusingthesamedevicestoreceivedigitalandanalogtransmissionsofthe
samerecordings.438Asoneparticipantputit,[t]omeitseemsobviousthathavingan
individualsongplayorperformanceonterrestrialradioinyourcarisfundamentallythe
sameasasatelliteradioSiriusXMplayinyourcarasisaPandorastreamviaawireless
cellphonetowerthroughyourcarradio.439
See SoundExchangeFirstNoticeCommentsat16(Therationaleforrequiringterrestrialradio
servicestopayroyaltiestoartistsandcopyrightownersisthesameasforallotherplatforms.);
see also, e.g., A2IMFirstNoticeCommentsat8;RIAAFirstNoticeCommentsat3031;SAG

AFTRA&AFMFirstNoticeCommentsat6.
433
See, e.g.,SAGAFTRA&AFMFirstNoticeCommentsat6;SoundExchangeFirstNotice
Commentsat16.
434
See A2IMFirstNoticeCommentsat8(AM/FMbroadcastersmakebillionssellingadstofolks
whotuneinforourmusicwhileoursoundrecordingcreatorsgetnothing.);NARASFirst
NoticeCommentsat9(BroadcastradioistheonlyindustryinAmericathatbasesitsbusinesson
usingtheintellectualpropertyofanotherwithoutpermissionorcompensation.);SAGAFTRA&
AFMFirstNoticeCommentsat6(Radiohasbuilta$15billionindustrybasedprimarilyonthe
exploitationofthecreativeworkofArtists,andshouldfinallyberequiredtofairlycompensate
thoseArtists.).
435
436
SoundExchangeFirstNoticeCommentsat16;LaPoltFirstNoticeCommentsat6.
DiMAFirstNoticeCommentsat4041;FMCFirstNoticeCommentsat15;RIAAFirstNotice
Commentsat3031;SiriusXMFirstNoticeCommentsat24;see also CopyrightAllianceFirst
NoticeCommentsat2.
437
SiriusXMFirstNoticeCommentsat34;see also DiMAFirstNoticeCommentsat4041(noting
thatplatformdistinctionsdonotmakesenseinthedigitalenvironmentwheretheverysame
consumerelectronicsdevicessuchasautomobileindashreceiversarecapableofreceiving
digitaland/oranalogtransmissionsofthesamesoundrecording).
438
439
GeoMusicGroup&GeorgeJohnsonMusicPublgat13.
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Predictably,terrestrialbroadcastersopposedanewrequirementtopayperformance
royaltiesforsoundrecordings,likeningsuchpaymentstoatariffaimedatsubsidizing
therecordingindustry.440Theystatethattheterrestrialbroadcastexemptionrepresents
areciprocaldynamicbywhichrecordlabelsandperformingartistsprofitfromthe
freeexposureandpromotionprovidedbyradioairplay,whilelocalradiostations
receiverevenuesfromadvertisersthatpurchaseairtimetoselltheirproductsand
services.441Asevidenceofthehighpromotionalvalueofbroadcastradio,theypoint
outthatrecordcompaniesspendmillionsofdollarsannuallytryingtopersuaderadio
stationstoplayorpromotetheirrecordings.442
Foreignperformanceroyaltiesareanimportantconsiderationinthisdebate.Virtually
allindustrializednationsrecognizeamorerobustsoundrecordingperformanceright
thantheUnitedStates;accordingtoproponentsoftheright,theUnitedStatesstandsout
onthelistofcountries(amongthemIranandNorthKorea)thatdonot.443Proponents
furtherpointoutthattheterrestrialradioexemptionpreventsU.S.soundrecording
ownersandperformersfromcollectingroyaltiesforforeignradiobroadcasts,asmost
countriesdonotrequirepaymentofperformanceroyaltiestoAmericansoundrecording
ownersduetothelackofreciprocity.444Accordingtooneestimate,inadditionto
forgonedomesticroyalties,U.S.soundrecordingownersaredeprivedofbetween$70
and$100millioninforeignroyaltieseachyear.445
See NABFirstNoticeCommentsat29.
440
Id.at28(citingresearchindicatingthepromotionalbenefitprovidedtotherecordingindustry
fromfreeradioairplayrangesfrom$1.5to$2.4billionannually).
441
Id.;see alsoGAOREPORTat50(explainingthatitiscommonforrecordcompaniestoemploy
independentpromoterstoencouragethebroadcastindustrytoperformtheirsongs).
442
See Tr.at287:1117(June23,2014)(BlakeMorgan,ECRMusicGroupand#IRespectMusic); The
Registers Call for Updates to U.S. Copyright Law:Hearing Before the Subcomm. on Courts, Intell. Prop.
and the Internet of the H. Comm. on the Judiciary,113thCong.3(2013)(The Registers Call for Updates
Hearing)(statementofRep.MelvinL.Watt)(Ithinkitistime,andthetimeislongoverdue,for
Congresstorecognizeaperformancerightinsoundrecordings....Tonotdosojustprolongs
thislongstandinginequityandkeepsusoutofpacewiththeinternationalcommunity.);
SoundExchangeFirstNoticeCommentsat1617(Thefreeridegiventoterrestrialradioalso
makestheU.S.anoutlierinternationally.Atleast75nationsrecognizesomeformofperformance
rightforterrestrialradio,andtheU.S.istheonlywesternindustrializednationthatdoesnot.).
443
See, e.g., RIAAFirstNoticeCommentsat3031;FMCFirstNoticeCommentsat1415;

444
SeeGAOREPORTat30;see alsoMaryLaFrance,From Whether to How: The Challenge of
Implementing a Full Public Performance Right in Sound Recordings,2Harv.J.ofSports&Ent.L221,
226(2011).
445
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Fortheirpart,broadcastindustryrepresentativesdisputetheamountofroyaltiessound
recordingownersareunabletorecoverasaresultofthelimitedperformanceright.446
TheypositthatU.S.expansionoftheperformancerightwillbeinsufficienttocompel
reciprocity,claimingmanyforeignnationswillcontinuetobalkatpayingroyalties
unlesstheU.S.makesotherconformingchangestoitslawaswell.447Theyalsomaintain
thatmanyU.S.soundrecordingownersarealreadypaidwhentheirworksare
performedabroad,asforeigncollectionsocietiesaresometimeswilling(oreven
compelled)topayfortheseuses.448
B. Governments Role in Music Licensing

1. PRO Consent Decrees
PROs,publishers,songwriters,andotherscriticizedtheASCAPandBMIconsent
decreesonmanyfronts,arguingthatthe75yearoldregimeisoutdated,449thatPROs
cannolongermeettheevolvingneedsofwriters,publishers,musiclicenseesand
NABclaimsthatproponentsofreconcilinginternationalperformancerightlawshavefailed
tosubstantiatetheactualamountofrevenueatissue.NABSecondNoticeCommentsat3.It
furtherassertsthat,evenifsubstantiated,[t]heestimated...$70milliondollarsinforeign
performancetariffsessentiallyconstitutearoundingerrortothemajorrecordcompanies.NAB
FirstNoticeCommentsat29n.15.
446
NABSecondNoticeCommentsat3([Proponents]alsoignorethefactthatmanyofthese
foreignregimesaredistinctlylessgeneroustosoundrecordingsinotherrespects.IftheU.S.isto
adopttheirregimesinonerespect,presumablyitshoulddosoinotherssuchasamuchshorter
termofprotection,noprotectionsagainstanticircumventiondevices,andculturalandother
playlistquotas.).
447
NABallegesthattheU.K.adherestosimultaneouspublicationrules,whichgrantU.S.
soundrecordingsthesamerightsasU.K.soundrecordingswhentheyarereleasedinboth
countriessimultaneously,thoughnoevidencedocumentingthatpointwassubmittedduring
thecourseofthisstudy.NABSecondNoticeCommentsat34;see alsoLaFrance,From Whether to
How: The Challenge of Implementing a Full Public Performance Right in Sound Recordingsat225
(explainingthat[i]npractice,manyforeigncollectingsocieties...havebeenwillingto
reciprocateevenbeforebeinglegallyrequiredtodoso,butnotingthatlawsandcollecting
societypracticesarenotidenticalandreciprocalarrangementsaregenerallynegotiatedonacase
bycasebasis).
448
SGAFirstNoticeCommentsat4;see also BMIFirstNoticeCommentsat3(notingthatthe

decreesmustbereviewedwithaneyetowardsmodernization);LaPoltSecondNotice
Commentsat15(explainingthattheconsentdecreesarerestrictiveandoutdated);NSAI
SecondNoticeCommentsat6(Nonperformingsongwritersarethreatenedwithextinction
under...theoutdatedASCAPandBMIConsentDecreemodels.);WixenFirstNotice
Commentsat3(ASCAPandBMIcannotsufficientlyrepresentsongwritersinterestswhile
operatingundertheoutdatedconsentdecrees.).
449
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ultimatelytheconsumers,450andthatwhiletheconsentdecreeswereimposedto
protectagainstanticompetitivebehavior,theyarenowusedtodistortandmanipulate
themarketforthebenefitofahandfulofpowerfuldigitaldistributioncompaniesthat
arethegatekeepersbetweenmusicscreatorsandthosewhowanttoenjoythat
music.451Licenseesandothers,however,believethattheconsentdecreesarevitalto
preventinganticompetitiveconductbythePROsandmajorpublishers.452Somebelieve
thatdirectantitrustregulationshouldbeextendedevenfurther,toencompassall
licensingofpublicperformancesofmusicalworks.453
Asnotedabove,theDOJisundertakingareviewoftheconsentdecreestoexaminetheir
continuedoperationandeffectiveness,andhassolicitedpubliccomments,whichreflect
manyofthesameconcernsthattheOfficeheardduringthisstudy.454WhiletheDOJis
focusedonwhethertheconsentdecreescanorshouldbemodifiedasamatterof
antitrustpolicy,thisstudyexaminestheimpactofthedecreesonthemusiclicensing
marketplaceingeneral.
a. Royalty Rates
Undertheconsentdecrees,anypartymayobtainpermissionfromASCAPorBMIto
performmusicalworksuponthesubmissionofanapplication.If,aftertheapplication
450
NMPA,CommentsSubmittedinResponsetotheDOJsAntitrustConsentDecreeReviewat5
(Aug.6,2014),available athttp://www.justice.gov/atr/cases/ascapbmi/comments/307900.pdf.
451
See, e.g.,CFA&PublicKnowledgeFirstNoticeCommentsat6([T]hecourtsrulingin[In re
Petition ofPandora Media] shouldputanendtotheclaimsthattheseantitrustdecreesare
obsoleteoroutdated.);CTIAFirstNoticeCommentsat6([T]hedecreesremainessentialto
fostercompetitivemarketpricingformusicperformancerights.);DiMASecondNotice
Commentsat16([ThePRO]collectivesrequiregovernmentoversight....[T]henatural
behaviorforcollectivesandmonopoliesistoinstinctivelyleveragetheirpositionandattemptto
extractsupracompetitiveratesandterms.);FMCFirstNoticeCommentsat6(Evenifthe
consentdecreesareexaminedregardingchangesinthemarketplace,therewouldbeno
compellingreasontocompletelyeliminatetheconsentdecreesandtheimportantlimitationsthey
placeonPROsandpublishersfromengaginginanticompetitivebehavior.);RMLCFirstNotice
Commentsat5([T]hepatternofpricecorrectionsandotherdecreeenforcementmeasures
implementedbythefederaljudiciaryfollowingvigorouslycontestedtrialsandappealsis
testimonytothecontinuingneedforjudicialsupervisionofASCAPandBMI.);TMLCFirst
NoticeCommentsat5([The]statusquorequires,attheveryleast,maintainingconstraints
protectingmusicuserssuchasthoseprovidedforintheASCAPandBMIconsentdecrees.).
452
See, e.g.,CTIAFirstNoticeCommentsat6(Duetothenatureofthemarkets,SESACandthe
majorpublishersalsoexercisesubstantialsupracompetitivemarketpower.Thatmarketpower
shouldalsobecontrolled.).
453

454
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U.S.CopyrightOffice
isreceived,thePROandusercannotagreetothelicensingfee,eithermayapplytothe
applicableratecourtforadeterminationoftherate.
Ingeneral,licenseesexpressedmoreconfidenceintheratecourtprocessthandidthe
PROsandcopyrightowners.Forinstance,DiMAopinedthatthetimetestedrates
haveconsistentlyestablishedroyaltyratesthatappropriatelyapproximatethefair
marketvalueofparticularlicensesindifferentcontexts.455CTIAobservedthattherate
courtsareessentialtofostercompetitivemarketpricingformusicperformance
rights.456
Incontrast,PROsandcopyrightownersstatedthattheratecourtsdeflatepublic
performanceroyaltiesbelowtheirtruemarketvalue.457Songwritersandpublishers
believethattheratecourtratesareinequitabletocopyrightowners,assertingthatthe
ratestheysetarebelowmarket,458unfairandunrealistic[],459andartificially
low.460Insupportoftheseclaims,severalstakeholderspointedtothe12to1(somesay
14to1)discrepancybetweentheratessetbytheCRBforthepublicperformanceof
soundrecordingsandratessetbyratecourtsforthepublicperformanceofmusical
works.461
Copyrightownerscomplainedthatthefairmarketvaluestandardemployedbythe
ratecourtsisinadequate,withalackofclarityregardingwhatfactorstheratecourt
455
CTIAFirstNoticeCommentsat6.
456
ASCAPFirstNoticeCommentsat26(Royaltyratesaresetatratesbelowwhattheevidence
indicatesaremarketlevels.);LaPoltFirstNoticeCommentsat11(Thecompulsoryratessetby
theratecourtsforlicensesareseverelylowerthantheirtruemarketvalue.);NARASSecond
NoticeCommentsat2(explainingthatrecentratecourtdecisionsmadepursuanttotheConsent
Decreeshaveresultedinroyaltyratesfordigitalmusicservicesthatarebelowfairmarket
value).
457
458
459
CouncilofMusicCreatorsFirstNoticeCommentsat5.
460
SCLFirstNoticeCommentsat12.
ASCAPFirstNoticeCommentsat29n.45,44(Thisalmost12to1disparityinSoundExchange
andPROpaymentsisunprecedentedintheglobalmusicmarketplace.ASCAPelsewherenotes
theratiomaybehigher,citingarateof12to14timesgreater.)(citationomitted);BMIFirst
NoticeCommentsat2(findingthatrecordingartistsarepaidasmuchas...twelvetimes[what
songwritersandpublishersarepaid]forthepublicperformanceright.);MusicManagers
Forum(MMF)&FeaturedArtistsCoalition(FAC)SecondNoticeCommentsat10(noting
thepriceformusicalcompositionsisdisadvantagedbyafactorof10or12to1); SESACFirst
NoticeCommentsat4(referencingaratioof13:1);Tr.at58:1921(June17,2014)(GaryR.
Greenstein,WilsonSonsiniGoodrich&Rosati)(referencing14to1feestothesoundrecording
copyrightownerversusthemusicalworkcopyrightowner).
461
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shouldconsider...andtheweightgiventothosefactors.462Anumberofcopyright
ownershighlightedsection114(i),whichprecludesconsiderationofratessetforsound
recordingperformancesbytheratecourts,asonereasonforbelowvaluePRO
performancerates.463Inaddition,ASCAPobjectedthatneitherASCAPnorBMIare
freetorefusetolicensetheirrepertories,leadingtoalackofcompetitivemarket
transactionsinvolvingnoncompelledsellerstouseasbenchmarksforthegovernment
regulatedrate.464
b. Rate Court Proceedings

Acommoncomplaintabouttheratecourtprocessisthatitisexpensiveandtime
consuming.465Netflixobservedthatboththesubstantialcostsoflitigationandthe
businessuncertaintiesinherentincourtdeterminedapproximationsofwhatisa
competitiverateimposeunnecessaryrisksandcostsonallparties.466MusicChoice
complainedthatcostsaredisproportionatelyburdensomeonindividuallicensees,
whereasaPROcanspreaditscostsacrosscopyrightowners.467ButASCAPobserved,
ASCAPandapplicantshavecollectivelyexpendedwellinexcessofonehundred
milliondollarsonlitigationexpensesrelatedtoratecourtproceedings,muchofthat
incurredsinceonly2009.468AndattorneyChristianCastleobjectedthatsongwriters
didnotaskfor[theprocess],cannotescapeit,andareforcedtoparticipate.469
ASCAPFirstNoticeCommentsat24;see alsoSESACFirstNoticeCommentsat6(Theconsent
decrees...offernodefinitionorguidelinesastowhatconstitutesreasonable.).
462
SeeBMIFirstNoticeCommentsat10(WebelievethattheprohibitionagainstthePROrate
courtsconsideringtheratessetforsoundrecordingsprovidesinpartanexplanationforthis
unintendeddisparity.);see alsoABKCOFirstNoticeCommentsat2;ASCAPFirstNotice
Commentsat2930.
463
464
Id.at3(Ratecourtproceedingshavebecomeextremelytimeandlaborintensive,costingthe
partiesmillionsinlitigationexpenses.);BMIFirstNoticeCommentsat89(Federalratecourt
litigationisanexceptionallyslowprocesstosetpricestokeepupwiththerapidlyevolving
digitalmarketplace,anditisexceedinglyexpensiveforallparticipants....);SESACFirstNotice
Commentsat7([T]heconsentdecrees...hold[]songwritersandmusicpublisherroyalties
hostagetosystematicallyprotractedratenegotiationsandexpensive,timeconsumingratecourt
proceedings.).
465
466
NetflixFirstNoticeCommentsat6.
467
MusicChoiceFirstNoticeCommentsat5.
468
469
CastleFirstNoticeCommentsat8.
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Federalcopyrightlitigationisnotonlyexpensivebutoftenlengthy,470andtheratecourts
arenoexception.AccordingtoBMI,atypicalratecourtcasecantakemanyyearstobe
resolved,whichincludestheinevitable,potentiallymultiyear,appealofthetrialcourts
decision.471ASCAPnotedthatalthoughtheconsentdecreemandatesthat
proceedingsmustbetrialreadywithinoneyearofthefilingoftheinitialpetition,that
deadlineisrarelymet.472AsmusicattorneyDinaLaPoltcommented,thedrawnout
proceedingscreatetheperceptionthatratecourtscannotkeepupwiththepacesetby
thenewdigitalmarketplace.473
c. Interim Fees
Otherconcernsrevolvearoundthefactthattherateforaparticularlicensemaynotbe
establisheduntillongafterthelicenseebeginsusingmusicalworks.TheASCAPand
BMIconsentdecreesallowmusicuserstoperformthePROsrepertoireuponthemere
filingofanapplicationforalicense,withoutpaymentofanylicensefee.474Asageneral
matter,songwriters,publishers,andPROsfounditunfairthatthecurrentratecourt
system...doesnotprovideforaninexpensive,effectivewaytosetinterimfeesto
compensatecreatorswhilethelongratesettingprocessplaysout.475
ThisfeaturepotentiallyexposesthePROstogamesmanshipbyapplicants,asthe
burdenisonthePROtomakeamotionfortheimpositionofaninterimfeeamotion
thatis,liketheratecourtproceedingitself,expensiveandtimeconsuming.476As
ASCAPelaborated:Evenwhenaninterimfeeispaid,itisoftenatlessthanfullvalue,
leadingmanylicenseestomakestrategicchoicestostayoninterimtermsuntilASCAP
determinesitmustcommenceanexpensiveratecourtproceeding.477BMIobserved
thatitisnotunheardofforanapplicanttogooutofbusinessbeforeafeeiseverset;as
aresult,thePROs(and,ofcourse,inturn,ourwriters,composersandpublishers)are
nevercompensatedfortheuseoftheirvaluablerepertoires.478
SeeU.S.COPYRIGHTOFFICE,COPYRIGHTSMALLCLAIMS2426(2013)available athttp://copyright.
gov/docs/smallclaims/uscosmallcopyrightclaims.pdf.
470
471
472
473
LaPoltSecondNoticeCommentsatapp.4.
474
ASCAPFirstNoticeCommentat15;BMIFirstNoticeCommentat16.
BMIFirstNoticeCommentsat3;see also LaPoltSecondNoticeCommentsatapp.4(notingthat
somelicenseesemploytheratecourtasadilatorytactictouseperformancelicensesforatime
withouthavingtocompensatethePROs.).
475
476
ASCAPFirstNoticeCommentsat16&n.22.
477
BMIFirstNoticeCommentsat17;see also ASCAPFirstNoticeCommentsat1516.
478
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d. Inconsistent Regulation of PROs

Yetanotherconcernisthedisparatetreatmentofentitiesthatlicenseperformancerights.
ThelargestPROs,ASCAPandBMI,aresubjecttodirectgovernmentoversightand
regulatedpricingundertheconsentdecrees.Otherentitiesthatrepresentsignificant
catalogsofworks,however,suchasSESACandGMRandmajorpublishers,whomay
withdrawfromthePROstolicensepublicperformancerightsdirectlyarenot.Some
contendthattheapplicationofdifferentrulestothesedifferentplayerscreatesan
unwarrantedcompetitiveimbalanceandopportunitiesforregulatoryarbitrage.479
LicenseesarguedthatSESAC,forexample,hastakenadvantageofthisdiscrepancyby
engaginginanticompetitivebehaviorthatisprohibitedundertheconsentdecrees.480As
notedabove,in2014,RMLCandlocaltelevisionstationseachseparatelysuedSESAC
seekingantitrustrelief.481RMLCarguedthatSESACspracticescreatedsignificant
overchargestoradiostationsfortheirusesofSESACmusic,482whilethelocaltelevision
stationscriticizedSESACforofferingonlyablanketlicenseandrefusingtoprovide
licenseeswithrepertoireinformation.483Thesesuitswerebothallowedtoproceedafter
SCLFirstNoticeCommentsat12(CommercialentitieslikeSESAC,startupslikeAzoffMSG
Entertainment[GMR]andavarietyofforeignPROsareallcompetingfortheopportunitytothe
collectrevenuesofthemusiccreatorsbutunlikeASCAPandBMI,arenotconstrainedby
antiquatedregulationsintheireffortstodoso.);SarahSkates,Global Music Rights Has Growing
Roster, Negotiating Power,MUSICROW(Oct.30,2014),http://www.musicrow.com/2014/10/global
musicrightshasgrowingrosternegotiatingpower/(opiningthatGMRwouldlikelyhavemore
powerthanotherPROsASCAPandBMIwhennegotiatinglicensesonbehalfofitsmembers,due
tothefactthatitwouldnotbesubjecttothesameregulatoryagreementsthatgovernthemore
establishedorganizations).
479
MusicChoiceFirstNoticeCommentsat10(GiventhecurrentstateofSESACsrepertory,the
samefactssupportingthecontinuedneedforratecourtregulationofASCAPandBMIapply
equallytoSESAC,andSESACshouldbesubjecttothesameregulationandratecourt
supervisionastheotherPROs.).
480
SeeRMLC v. SESAC,29F.Supp.3d487;Meredith Corp.,1F.Supp.3d180.
481
RMLCFirstNoticeCommentsat2.
482
TMLCFirstNoticeCommentsat14;see alsoSiriusXMFirstNoticeCommentsat6([SESACs]
combinationofconcentratedownershipandeitheranunwillingnessorinabilitytobetransparent
astowhatworksareactuallyintherepertorycreatesacompletelyuntenablesituation.).
483
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therespectivecourtsdeniedSESACsmotionstodismiss.484(ThepartiestotheNew
YorkcasebroughtbyMeredithCorporationhavesinceagreedtoasettlement.485)
SESACdisagreedthatithasacompetitiveadvantage,insteadcontendingthatbecause
theindustry...aroseinaculturethatassumesthattheratessetbytheratecourtsare
accurate...SESACmustalsoacceptthoserates.486Andcopyrightownerssuggested
thattheratesobtainedbySESACandGMRoutsideoftheconsentdecreesmightbe
usefulasmarketbenchmarksinratecourtproceedings.487
Evenwithintheconsentdecreeframework,thereareregulatorydiscrepancies.The
ASCAPandBMIdecreesareadministeredbydifferentdistrictcourtjudges,andinthe
past,therehavebeenperiodsoftimeduringwhichtheASCAPandBMIdecrees
includedsignificantlydifferentterms.488Thedecreesarestillnotentirelyaligned.For
example,theASCAPconsentdecreeexpresslyprohibitsASCAPfromlicensingany
rightsotherthanpublicperformancerights,whiletheBMIconsentdecreecontainsno
suchprovision.BMIhasexpressedtheviewthatitmaylicenseotherrightsunderits
consentdecreebuthasyettodoso.489Inshort,[n]othingobligatestheratecourtsto
reachsimilarresultsonratesettingorotherissues.490
e. Parties Proposals
Stakeholderssuggestedabroadrangeofsolutionstotheperceivedshortcomingsofthe
consentdecreesgoverningASCAPandBMI.Themostsalientproposalsarediscussed
below.
RMLC v. SESAC,29F.Supp.3dat50003(dismissingpricefixingallegation,butallowing
monopolyclaimtoproceed);Meredith Corp. v. SESAC LLC,No.09cv9177,2011WL856266,at*1
(S.D.N.Y.Mar.9,2011)(denyingmotiontodismiss).
484
MemorandumofLawinSupportofPlaintiffsUnopposedMotionforPreliminaryApprovalof
Settlementat12,5,Meredith Corp.,1F.Supp.3d180(No.09cv9177).TMLC,whichwasnota
partytothelitigation,wasalsoasignatorytothesettlement.Id.at1n.2.
485
Tr.at61:0411(June5,2014)(ReidAlanWaltz,SESAC);see alsoTr.at58:2059:03(June23,2014)
(BillLee,SESAC)(AlthoughSESACisnotunderaratecourt,manyratecourtdecisionsdohave
anegativeimpactonSESACsabilitytomodifylicenseagreements.Andultimatelyitisthe
creator,thesongwriter,whosuffersbecauseofthatlackofmodernization.).
486
487
ProductionMusicAssociationSecondNoticeCommentsat5.
See generallyRICHARDA.EPSTEIN, ANTITRUST CONSENTDECREES :INTHEORYAND PRACTICE

3039(2007)(EPSTEIN)(describingdifferencesbetweenthedecreesandconcludingthatthe
consentdecreesdidnotkeepASCAPandBMIinparityatalltimes,sothatdifferential
regulationsgovernedkeyportionsoftheirbusiness).
488
489
See BMI,CommentsonDepartmentofCommerceGreenPaperat45.
490
LaPoltFirstNoticeCommentsat12.
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Complete or Partial Withdrawal of Rights

Asdiscussedabove,theASCAPandBMIratecourtsrecentlyconcludedthat,underthe
consentdecrees,musicpublisherscouldnotwithdrawonlynewmedia(i.e.,digital
streaming)rightsfromthePROstobelicenseddirectly.Asaresult,themajor
publishershavepetitionedtheDOJseekingmodificationoftheconsentdecreestoallow
forsuchpartialwithdrawals.Asanalternativeplan,majorpublishersarealso
evaluatingwhethertowithdrawtheirworksentirelyfromthePROsanddirectly
negotiatepublicperformanceratesoutsideoftheconsentdecreeframework.491
Abroadrangeofstakeholdersexpressedseriousapprehensionaboutcomplete
publisherwithdrawal,predictinghavocforthemusicindustry.492BMInotedthat
completewithdrawalispotentiallycatastrophicforsmallerpublishersandsongwriters
whodependonBMIfortheirlivelihood,andforBMIshundredsofthousandsof
customerswhodependonBMItofulfilltheircopyrightobligations.493Significantly,
MartinBandier,chairmanandCEOofSony/ATVoneofthemajorpublishers
consideringfullwithdrawalsimilarlypredictedthatifSony/ATVfounditnecessaryto
withdraw,suchanoutcomecouldbecatastrophicforASCAPandBMI.494
PartoftheconcernisthatmanyadministrativecostsofrunningaPRO,suchas
negotiatinglicensesormonitoringradiostations,donotscaledownwardwitha
reductioninrevenues;aroyaltycheckcoststhesameamounttoprocesswhetheritis
largeorsmall.ASCAPandBMIoffsettheiradministrativecostsbycharginga
commission(roughly13%ofroyaltiespaidinbothcases495).Ifmajorpublishersareto
whollywithdraw,thecommissionscollectedbythePROsfromthesubstantialroyalties
generatedbythosecatalogswouldnolongerbeavailabletodefrayfixedoverhead
expenses.Asaresult,theremainingsmallermembersoftheseorganizationswould
havetoshoulderthefulladministrativecosts,likelythroughsignificantlyhigher
commissions.496SomecommentersquestionedwhetherthePROswouldbeableto
BMIFirstNoticeCommentsat9([M]anyknowledgeablepublishers...havelostconfidence
intheefficacyoftheratecourtprocesstoyieldfairmarketvalue.Thatlossofconfidenceis
drivingpublisherstomoveawayfromthePROstoavoidthisperceivedinadequacy.).
491
See, e.g.,Tr.at23:1720(June17,2014)(TimothyCohan,PeerMusic)([T]hereseemstobe
consensusthattherewouldbeuniversalhavocIthinkthatsanapttermiftotalwithdrawals
weretohappen.);Tr.at30:0506(June17,2014)(AshleyIrwin,SCL)(statingthatpublisher
withdrawalswouldresultintotalhavoc).
492
493
BMISecondNoticeCommentsat12.
494
Sisario,Pandora Suit May Upend CenturyOld Royalty Plan.
495
A2IMFirstNoticeCommentsat6.
See, e.g., ASCAPSecondNoticeCommentsat34(predictingthatwithdrawingpublisherswill

resultinalossofrevenuebutwithoutanattendantdropinexpenses,whichwillhavetobe
496
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continueinoperationinsuchacircumstance.497Arelatedconcernisthatsmaller
publishersmightfaceunsustainableincreasesinlicensingandtransactioncostsas
independententities,whichcouldleadtogreaterconsolidationinthemusicpublishing
market.498
Nonetheless,basedontheirpublicstatementsandcommentsduringthisstudy,atleast
twomajorpublishersUMPGandSony/ATVappearpoisedtowithdraw.499In
contrasttoSony/ATV,arepresentativefromUMPGsuggestedthatsuchanactionwould
notbetheendofthePROs:
Wecouldwithdrawtomorrow,anditwouldbeseamless.Thelandscape
wouldnotchangethatmuch.Youretalkingaboutintroducingmaybea
fewadditionalplayerstothelicensingprocess,Universalbeingoneof
them.Thesocietiesdontgoaway.Thesocietiescontinuetoexistfor
thosewritersandpublisherswhodonthavetheresourcesthatwere
fortunateenoughtohavetocreateinfrastructurestodealwithlicensing
anddatamanagement,butthereareseveralsolutions,theyareall
workable,andtheydontimpacttheindustryorthewritercommunity
negatively.500
unfairlybornebytheremainingASCAPmembers);see also LaPoltFirstNoticeCommentsat12

13;NARASSecondNoticeCommentsat2.
Tr.at9:0915(June5,2014)(SamMosenkis,ASCAP)([I]ftherevenues...decrease[]by60
percent,clearlyoperatingratiosaregoingtoincrease,possiblytoapointwherewecantoperate
efficientlyenoughandthewholeconceptofefficientlicensingreallydropsdownthedrain.);see
also NSAISecondNoticeCommentsat3(Ifmajormusicpublishersdirectlylicenseandcollect
thedigitalperformanceroyaltieseasiesttoaccomplish,itisunlikelythatASCAPandBMIcould
continuetoexistonwhatisleft,atleastwiththesameefficiencyandcost.).
497
See, e.g.,RIAAFirstNoticeCommentsat39([O]utrightwithdrawalisapossibilitythat
imperilsthewholemusicalworkperformancelicensingsystem,andcreatesariskthattherewill
benopracticalwaytoaccessworks,andsharesofworks,ownedbysmallerpublishers.).
498
See ASCAPFirstNoticeCommentsat36;Tr.at37:0239:08(June17,2014)(DavidKokakis,
UMPG);see also EdChristman,Sony/ATVs Martin Bandier Repeats Warning to ASCAP, BMI,
BILLBOARD(July11,2014),http://www.billboard.com/biz/articles/news/publishing
/6157469/sonyatvsmartinbandierrepeatswarningtoascapbmi(reportingthedetailsofaletter
sentbySony/ATVchairmanandCEO,MartinBandier,toSony/ATVsongwritersexplainingthat
Sony/ATVmayhavenoalternativebuttotakeallofourrightsoutofASCAPandBMI).
Warner/Chappelldidnotparticipateinthestudy,butpreviouslyannouncedtheirintentionsto
withdrawtheirNewMedialicensingrightsfromASCAPalongwithotherlargepublishers,
followingcompletionoftheJune2012dealbetweenPandoraandSony/EMI.In re Pandora,2013
WL5211927,at*3.
499
500
Tr.at34:1835:09(June17,2014)(DavidKokakis,UMPG).
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Asanalternativetofullwithdrawal,partialwithdrawalofonlynewmediarights
remainsapossibilityiftheratecourtsallinoralloutinterpretationsoftheconsent
decreesarereversedonappeal,ortheDOJconcludesthatitshouldsupporta
modificationofthedecreestopermitit.ThePROsandmajorpublishershaveadvanced
severalargumentsinfavorofpartialwithdrawal,includingtheirviewthatitwould
allowforfairer,marketbasedratesfornewmediauses,thatitwouldallowforgreater
flexibilityinlicensingterms,andthatdirectlynegotiatedlicenseswithdigitalservices
wouldprovideacompetitivebenchmarkinratesettingproceedingsgoverningnon
withdrawingpublishers.501
Licensees,however,statedthatevenpartialwithdrawalwouldunderminethe
protectionoftheconsentdecrees,andallowthewithdrawingpublisherstoraiserates
throughtheexerciseofunfetteredmarketpower.502MusicChoiceclaimedthatforthe
briefperiodbeforetheASCAPratecourtbannedpublisherspartialwithdrawal,
negotiationswithSonyandUMPGwereoppressive,andresultedinsubstantially
higherroyaltyrates.503Othersechoedtheconcernthatpublisherswouldengagein
anticompetitivebehavior.504
Songwritersalsohavesignificantconcernsaboutpublisherwithdrawals,specificallyas
tohowthewritersshareofperformanceroyaltieswouldbeadministeredandpaid.
Songwritercontractstypicallyprovidethatthewriterssharewillbecollectedandpaid
throughaPRO,505butmanyofthesecontractslikelydonotcontemplatepublisher
withdrawalfromthePRO.506Songwritersfearthat,iftheyinsteadreceivepayment
throughthepublisher,theywillbevulnerabletothepublisherslesstransparent
See, e.g.,ASCAPFirstNoticeCommentsat3435.
501
DiMAFirstNoticeCommentsat32([I]ftheantitrustconsentdecreesweretobemodifiedby
theDepartmentofJusticetoaccommodatelimitedwithdrawals...themarketplaceformusical
workpublicperformancerightswouldbesignificantlycompromised.).
502
503
PublicKnowledge&CFAFirstNoticeCommentsat5(WhenASCAPallowedthelargest
musicpublisherstoremovetheirdigitalrightsfromtheexistingcontracts,[thepublishers]
immediatelyreturnedtotheabusivepracticesthathadmadetheconsentdecreenecessaryinthe
firstplace.);Tr.at52:0720(June24,2014)(PaulFakler,MusicChoice)([Afterpublishersdid
partiallywithdraw]therewasevidencefromtherecord,ofcollusion,strongarmtacticstoinflate
therates,sharingconfidentialinformationaboutnegotiations.).
504
Tr.at12:0709(June17,2014)(GarrySchyman,SCL)(Weonlyreceivethewritersshare,and
thatscontractual.);Tr.at24:1316(June17,2014)(TimothyCohan,PeerMusic)(Contractshave
mentionedthewritersshareforalong,longtime.Theyarenotconsistent.Itisoftennegotiated
fromcontracttocontract.).
505
Tr.at12:1014(June17,2014)(GarrySchyman,SCL)([V]eryoftenthecontractsdonotspecify
whatwouldhappenifthemusiciswithdrawnfromaPRO.Itmerelysaysifmoneyiscollected
throughyoursociety,thatyouareentitledtoreceiveyourshare.).
506
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accounting.507FMCsuggestedthat[a]nyfurtheramendmentstotheconsentdecrees
mustbedonewithcompletetransparencyandwithathoughtfulconsiderationofthe
impactonsongwritersleverageandcompensation.508
TheSCLvoicedconcernsthatwithdrawalofpublishersfromU.S.PROswouldcause
problemsforforeignsongwriters,whoenterintoexclusivearrangementswiththeirlocal
performingrightssociety,whichinturnauthorizeU.S.PROstocollectroyaltiesontheir
behalfthroughreciprocalrelationships.AccordingtoSCL,aU.S.publisherrepresenting
aforeignauthorsworksunderasubpublishingagreementlackstheauthorityto
withdrawthatwritersrightsfromtheU.S.PRO.509Questionedaboutthis,David
KokakisofUMPGrespondedthathiscompanyhasconsideredtheinternational
implicationsofwithdrawalanddoesnotcurrentlyintendtodisruptthat[reciprocity]
model.510KokakismaintainedthatexploitationofforeignworksintheUnitedStates.
..wouldcontinuetorunthroughthe[U.S.]societies.511
AnumberofstudyparticipantsproposedcontinuedrelianceuponthePROstocollect
andadministerroyaltiesfromlicenseesevenunderdirectlynegotiateddeals.512
AccordingtoASCAP,whenthemajorpublisherssoughttowithdrawtheirnewmedia
rights,ASCAPenteredintoadministrationarrangementswiththewithdrawing
publishersthatenabledthepublisherstonegotiatedirectlytheirdigitalrightsinthe
freemarket,butleavetheadministrationofsuchdealsreceivingfees,processingmusic
useinformationdata,matchingworkstointerestedpartiesandpayingallinterested
partiestoASCAPforafee.513Suchanarrangementmightalsoaddresstheconcern
thatthewithdrawingpublisherswouldlacktheinfrastructuretolicenseandcollect
performanceroyaltiesfrombars,restaurantsorliveperformancevenues.514
NARASSecondNoticeCommentsat2(notingthattherestofthemusicecosystemwould
losetheefficiency,transparencyandstabilityprovidedbythePROs.);PublicKnowledge&CFA
FirstNoticeCommentsat18;Tr.at33:2234:06(June24,2014)(RickCarnes,SGA).
507
FMCFirstNoticeCommentsat67.
508
Tr.at31:1632:04(June17,2014)(AshleyIrwin,SCL)([M]ydealwith[aforeignPRO]doesnot
allowasubpublishertopulloutofanAmericansociety.Itcontravenesmyagreementwithmy
localsociety.SoIdontknowifanybodyhasconsideredwhattheforeignsocietieswilldoifthe
publisherspulloutherethatarerepresenting,onceagain,areciprocitything.).
509
Tr.at34:1113,43:0910(June17,2014)(DavidKokakis,UPMG).
510
Id.at43:1719.
511
Id.at38:0608;BMISecondNoticeCommentsat14;see also Tr.at45:0510(June16,2014)

(AshleyIrwin,SCL)(proposingbifurcationofpublicperformancerightbetweenpublishersand
songwriters,sothatsongwriterscouldcontinuetoutilizethePROs).
512
513
ASCAPSecondNoticeCommentat6.
NSAISecondNoticeCommentsat3;see alsoNMPA&HFAFirstNoticeCommentsat20
([Withdrawal]presentsaHobsonschoiceformusicpublisherseitherpulloutofASCAP
514
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Elimination Versus Expansion of Consent Decrees

Duringthecourseofthisstudy,PROs,publishers,andsongwritershaveadvocatedfor
thesunsetoftheconsentdecreesthatgovernASCAPandBMI.515ASCAPnotedthe
anomalythatthedecreescontinue[]intoperpetuityregardlessoftheincreased
competitioninthemarketplaceforlicensingthepublicperformanceofmusical
works.516ASCAPthusviewsthedecreesasparticularlypunitiveinnaturewhen
viewedinlightofcurrentDOJpolicy,whichmandatestheinclusionofsunset
provisionsinstandardconsentdecrees,andunderwhichtheDOJdoesnotcurrently
enterintoconsentdecreeswithtermslongerthantenyears.517ASCAPobservedthat
themarketplacehasundergonemassivechangessinceitsdecreewasfirstadoptedin
1941,inthatASCAPnowfacesvibrantcompetition,notonlyfromBMI,butalsofrom
unregulatedcompetitorssuchasSESAC,foreignPROs,andnewmarketentrants,as
wellasfromASCAPsownpublisherandwritermembers.518BMIsimilarlypointsout
thatoutmodedviewsofthepurportedmonopolypowerofregulatedcollectivessuch
asBMIandASCAPneedtobediscardedasdigitaltechnologyhasmadeiteasierfor
creatorsanddistributors,includingunregulatedcompetitorstoPROs,toidentify
performancesandtheirowners.519
Incontrast,licenseesfearthatsunsetoftheconsentdecreeswouldleadnotjusttohigher
butsupracompetitiveratesthatareallthemoreproblematicwhenlicenseeshaveto
payperformanceroyaltiesforbothsoundrecordingsandmechanicalrights.520Awide
rangeoflicenseesaccordinglysupportthecontinuationoftheconsentdecreesin
essentiallyunchangedform.521
Someparticipantswentfurtherbysuggestingthattherestrictionsimposedbythe
consentdecreesshouldbeextendedtothesmallerPROsnotcurrentlysubjecttodirect
completely(andtakeonthedifficultburdensofgenerallicensing,e.g.,licensingtosmallmusic
userssuchasbarsandclubs),orforfeittherighttonegotiateagreementsatmarketrateswith
digitalserviceproviders.).
BMIFirstNoticeCommentsat20;ASCAPFirstNoticeCommentsat4.
515
Id.at3738.
516
Id.at38;see alsoBMIFirstNoticeCommentsat13(In1979,the[DOJ]determinedthat
enteringintoperpetualconsentdecreeswasnotinthepublicinterest.).
517
518
519
See, e.g.,MusicChoiceFirstNoticeCommentsat8.
520
See, e.g.,DiMAFirstNoticeCommentsat15(Theprocessesandprotectionsassuredbythese
consentdecreesserveseveralimportantrolesthatarecriticaltoanefficient,properlyfunctioning
marketplacefortheserights....).
521
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supervision.Forexample,NetflixsuggestedthatallPROsshouldbesubjecttothesame
ratesettingauthorityandthatPROscoulddividethesharesoftheroyaltypoolsamong
themselves.522Participantsalsosuggestedthatwithdrawingmajorpublishersshouldbe
subjecttooversightandpossiblyaconsentdecreetoprotectagainstaconcentrationof
marketpower.523
Rate Court Changes
Thecostsandlengthofratecourtproceedingarefrustratingformany.Some
includingASCAPandBMIhavesuggestedreplacingtheratecourtswithan
alternativedisputeresolutionprocesssuchasarbitration.524IPACadvocatedforprivate
negotiationfollowedbyexpeditedmediationwithinprescribedtimelimits.525
Licensees,however,wereskeptical.NABstatedthat[t]hereisnoreasontobelievethat,
withoutdrasticeliminationofappropriateandessentialdiscoveryandappellatereview,
privatearbitrationwillbeanymoreefficient,speedy,orcosteffectivethantherate
courts.526FMCvoicedaconcernthatsealedarbitrationproceedingswouldthreaten
transparency.527Evenwhileacknowledgingtheratecourtsflaws,anumberoflicensees
supportedthecontinuationofthatregime,inpartduetoitsproceduralsafeguards,
includinguseoftheFederalRulesofCivilProcedureandEvidence.528Asonelicensee
opined,theprocessofratesettingundertheASCAPandBMIconsentdecreesandthe
NetflixFirstNoticeCommentsat7.
522
See, e.g.,Tr.at44:2245:05(June5,2014)(LeeKnife,DiMA)(Ithinkwheneveryouhavethat
typeofconcentrationofmarketpower,thatkindofdemandssometypeofoversight,again,
whetherornotthatsintheformofacompulsorylicense,astatutorylicense,aconsentdecree,or
somethinglikethat.);Tr.at52:0720(June24,2014)(PaulFakler,MusicChoice).
523
ASCAPFirstNoticeCommentsat2324(explainingthatarbitrationwouldofferamore
definitetimelineandwoulddiscourageapplicantsfromrelyingonthelicenseapplicationor
interimlicenses);Music Licensing Hearingsat52(statementofMichaelONeill,CEO,BMI)(We
believethatreplacingthecurrentratecourtwitharbitrationinNewYorkundertheAmerican
ArbitrationAssociationruleswouldbeafaster,lessexpensive,andamoremarketresponsive
mechanismforallpartiestoobtainfair,marketvalueratedecisions.);ContentCreators
CoalitionSecondNoticeCommentsat23.
524
525
IPACFirstNoticeCommentsat9.
NABSecondNoticeCommentsat2;see alsoMusicChoiceSecondNoticeCommentsat8;Tr.at
55:1416(June24,2014)(WillardHoyt,TMLC)(Ithasbeenourexperiencethatarbitrationisnot,
necessarily,lessexpensivethantheratecourt.).
526
527
Tr.at88:2189:05(June23,2014)(CaseyRae,FMC).
528
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hypotheticalcompetitivemarketstandardforratesettingappliedinRateCourtcases
hasworkedreasonablywell.529
PROsandpublishersalsoseektoencourageinterimpaymentofroyaltiespendingthe
determinationofafinalrate.MMFandFACsuggestedthat[a]ttheveryleastUS
licenseesshouldberequiredtomakeaninterimpaymentpendingtheissuingofafinal
licensewithanagreedtariff.530BMIsuggestedthatratherthaninvokingthe
burdensomeratecourtprocesstosetaninterimrate,thefeecouldbesetattheratethe
licenseepaidunderitslastlicenseor,fornewusers,thegoingindustryrate.531
Bundled Licensing
ThereappearstobebroadagreementamongstakeholdersthatPROsandotherlicensing
entitiesshouldbeabletobundleperformancerightswithreproductionanddistribution
rights,andpotentiallyotherrights,tomeettheneedsofmodernmusicservices.532
NSAI,forexample,opinedthat[t]hemostefficientpathtodigitalserviceproviders
obtainingnecessarylicenseswouldbetoallowthePROstolicenseandcollect
mechanicalroyalties.533
Stakeholdersofferedconflictingmethodsbywhichbundledrightscouldbemade
available.Forinstance,NMPAsuggestedthatbundledrightscouldbesoughtdirectly
fromthemusicpublishersthatownandadministerthesonginquestion.534Butthe
PROssuggestedthattheirexistingstructurescouldbeleveragedtofacilitatebundled
NetflixFirstNoticeCommentsat78(emphasisinoriginal);see alsoSiriusXMFirstNotice
Commentsat4(Inourexperience,theASCAPandBMIconsentdecreesandthelicensing
processthattheymandateworkrelativelywell.);SpotifyFirstNoticeCommentsat10
(explainingthatthecurrentsystemwherethePROsaresubjecttoregulationviatheconsent
decreesisworkingwell).
529
MMF&FACSecondNoticeCommentsat10.
530
531
See ASCAPFirstNoticeCommentsat30;DiMAFirstNoticeCommentsat25(Amechanism
shouldbeputinplacethatenablesthecollectiveadministrationofanallin,combined
mechanicalandperformanceroyalty.);IPACFirstNoticeCommentsat8(Aunifiedlicensing
schemeforusesthatrequirebothpublicperformanceandmechanicallicensescouldbenefitboth
licenseesandcopyrightowners.);RIAAFirstNoticeCommentsat6([T]hemarketplaceneeds
bundlesofrights.);PublicKnowledge&CFAFirstNoticeCommentsat28;SCLFirstNotice
Commentsat12.
532
533
NMPA&HFAFirstNoticeCommentsat18;Tr.at239:1518(June24,2014)(JayRosenthal,
NMPA).
534
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licensingonablanketbasis,ifonlytheconsentdecreeswereamended.535Severalparties
alsoobservedthatallowingbundlingofrightswouldalignU.S.musiclicensingwith
collectivepracticesinEurope.536
Elimination of Section 114(i)
SongwritersandpublishersexpressedsupportfortheSEA,which,inadditionto
addressingtheratesettingstandardundersection115,wouldamendsection114(i)to
removelanguageprohibitingtheratecourtsandotherbodiesfromconsideringthe
licensefeespayableforthepublicperformanceofsoundrecordingswhendetermining
ratestobepaidformusicalworks.537ProponentsoftheSEAstatedthatratecourts
shouldbeabletoconsiderallrelevantevidence538andpredictedthatthecourts,after
consideringtheCRBestablishedsoundrecordingrates,wouldincreaseperformance
ratesformusicalworkssothattheyweremorecommensuratewithratespaidforsound
recordings.539
Musicservicesopposedamendingsection114(i)onthegroundthateliminatingthe
evidentiaryexclusionoftheCRBsetrateforsoundrecordingswouldincreaseratesfor
musicalworkswithoutaproportionaldecreaseofratesforsoundrecordings,leadingto
anoverallescalationoftotalcontentcoststopotentiallyunsustainablelevels.540Some
notedthatthosewhonowsupporttheeliminationofthatprovisionarethesameparties
whosoughtitinthefirstplace,astheprovisionwasenactedoutofcopyrightowners
ASCAPFirstNoticeCommentsat3034;BMIFirstNoticeCommentsat1516;Tr.at273:1315
(June24,2014)(RichardReimer,ASCAP);Tr.at38:0304(June24,2014)(StuartRosen,BMI).
535
BMIFirstNoticeCommentsat6;Tr.at32:2033:01(June4,2014)(DanColeman,ModernMusic
WorksPublishing);Tr.at273:0712(June24,2014)(RichardReimer,ASCAP).
536
537
SEA,H.R.40792.
See, e.g.,NMPA&HFAFirstNoticeCommentsat2122;BMIFirstNoticeCommentsat1819;
SESACFirstNoticeCommentsat34;NARASFirstNoticeCommentsat4;GeoMusicGroup&
GeorgeJohnsonMusicPublgFirstNoticeCommentsat16;Tr.at198:0917(June5,2014)(Daniel
Gervais,VanderbiltUniversityLawSchool)(notingwhenyoureadintheCopyrightRoyalty
Boarddeterminationthatthevalueofasoundrecordingisunrelatedtothevalueofthesong...
[t]ome,thatcompletedisconnectisnotwarranted).
538
See,e.g.,BMIFirstNoticeCommentsat18;ASCAPFirstNoticeCommentsat2730;SESAC
FirstNoticeCommentsat5;NMPA&HFAFirstNoticeCommentsat2628;NARASFirstNotice
Commentsat4;LaPoltFirstNoticeCommentsat12.
539
See e.g.,CTIAFirstNoticeCommentsat12(notingthatpublisherswantitbothwaysthey
wantthehighersoundrecordingfeestoberelevantinsettingtheirfees,buttheywanttoprotect
theiraffiliaterecordcompaniesandensurethatsoundrecordingfeesarenotdraggeddownby
muchlowermusicalworksfees);MusicChoiceFirstNoticeCommentsat34(Thesimplefactis
thatthedisparityinratesbetweentheSection114licenseandthePROlicensesdoesnotprove
thatthePROratesaretoolow;itprovesthattheSection114ratesaretoohigh.).
540
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concernthatconsiderationofsoundrecordinglicensefeesmightdepressmusicalwork
rates.541Opponentsfurtherobservedthatmusicpublishersthemselvespreviously
testifiedbeforetheCRBthatitwaseconomicallylogicalandnecessarytomaintaina
distinctionbetweenmusicalworkandsoundrecordingrates,andarenowsimply
questioningtheirpriorjudgmentinlightofthehighersoundrecordingratessetbythe
CRB.542
2. Mechanical Rights Licensing

Manypartieshavecalledforeitherthecompleteeliminationormodernizationofsection
115,citingissuessuchastheadministrativechallengesofthelicense,theinaccuracyand
slownessoftheratesettingprocess,andfrustrationwithgovernmentmandatedrates.
a. Royalty Rates and Standard

Abroadrangeofpartiesexpresseddissatisfactionwithroyaltyratesestablishedbythe
CRB.Musicpublishersandsongwritersarguethattheratesdeterminedunderthe
section801(b)(1)standardapplicabletosection115aredepressedasaresultofthe
governmentratesettingprocessanddonotreflectthefairmarketvalueofmusical
works.Whileadvocatingfortheeliminationofthecompulsorylicense,theseparties
alsoassertthatattheveryleastmechanicalratesshouldbeestablishedunderthemore
marketorientedwillingbuyer/willingsellerstandardthatappliesunderthesection112
and114licenses.543
Musicalworkownersexplainthatsection115actsasaceilingthatdoesnotallowthem
toseekhigherroyaltiesthroughvoluntarynegotiations.544Manypointtothefactthat
thecurrent9.1centrateforphonorecordshasnotkeptpacewithinflation,sincethe
CTIAFirstNoticeCommentsat1112.;Tr.at254:0619(June16,2014)(RussellHauth,
NRBMLC)(Nowthatthesoundrecordingindustryhasgotagreatrate,themusicalworkswant
thesame,andtheywanttonotbeseparatedanylonger.Youknow,Ivegottosaythatsfairly
hypocritical.).
541
See,e.g., NRBMLCFirstNoticeCommentsat1112;Tr.at254:0619(June16,2014)(Russell
Hauth,NRBMLC);Tr.at76:2279:07(June24,2014)(BruceRich,RMLC);Tr.at85:1386:07(June
24,2014)(PaulFakler,NAB).
542
See ABKCOFirstNoticeCommentsat1;BMIFirstNoticeCommentsat5;GearPublgCo.&
LisaThomasMusicServs.,LLCFirstNoticeCommentsat4;IPACFirstNoticeCommentsat7;see
also Tr.at119:0109(June17,2014)(JohnRudolph,MusicAnalytics);Tr.at33:2034:02(June23,
2014)(JayRosenthal,NMPA).
543
See CarapetyanSecondNoticeCommentsat1(Therealityisitisrarelyusedinstandard
industrypractice,servingonlyasaframeworkfornegotiatingtermsofdirectlicenses,butacting
asade factoceilingforroyaltyratesnonetheless.);GeoMusicGroup&GeorgeJohnsonMusic
PublgFirstNoticeCommentsat10(opiningthatthestatutory rate is still a capandas noneffective
as it gets.)(emphasisinoriginal);NSAISecondNoticeCommentsat7.
544
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original2centratesetbystatutein1909wouldbe51centstodayifadjustedfor
inflation.545Inaddition,anumberofparticipantsnoteda9to1inequityofrates
betweensoundrecordingsandmusicalworksfordownloadsandCDs:whenasongis
downloadedfromiTunesfor$1.29,approximately80centsisallocatedforthesound
recording,butonly9.1centsgoestothemusicalwork.546Bywayofcontrast,ratesfor
privatelynegotiatedsynchronizationlicenseswhicharenotsubjecttogovernment
oversightgenerallyreflecta1to1ratiobetweenmusicalworksandsound
recordings.547
Digitalmusicservices,however,disagree,contendingthatthestatutoryratessetunder
thesection801(b)(1)standardreflectfairmarketvalue,orhigher.548Accordingtothem,
thestatutoryratesprovideausefulbenchmarkfordirectdealsbyprovidinga
frameworkbywhichtonegotiatesuchdeals.549Theycontendthatthewilling
buyer/willingsellerstandardisfaultyatbestsincethemarketthestandardseeksto
constructoremulatedoesnotexistandoftenhasneverexisted,550whereasthesection
801(b)(1)standardisflexibleandmorepredictableandaccountsforfairnessin
compensatingcopyrightowners.551
Thoughrecordlabelsareinagreementwithdigitalmusicservicesthatthesection
801(b)(1)standarddoesnotresultinrateslowerthanfairmarketvalue,theyhavealso
advocatedchangingtheratestandardtothewillingbuyer/willingsellerstandard.552
Recordlabelspointtotheimportanceofemphasizingfairmarketvalueasthegoalof
anyratesettingprocessandarguethatharmonizingthestatutoryratestandardsby
See LaPoltSecondNoticeCommentsat9;MMF&FACSecondNoticeCommentsat6;Modern
WorksMusicPublishingFirstNoticeCommentsat45;see also Tr.at250:1521(June4,2014)
(BrittanySchaffer,NMPA/Loeb&LoebLLP).
545
NMPA&HFAFirstNoticeCommentsat16;Tr.at266:14267:05(June16,2014)(Ilene
Goldberg);see also KohnFirstNoticeCommentsat1920.
546
LaPoltFirstNoticeCommentsat14;NMPA&HFAFirstNoticeCommentsat16;see also Tr.at
60:2022(June4,2014)(BrittanySchaffer,NMPA/Loeb&LoebLLP).
547
See DiMAFirstNoticeCommentsat23(TheSection801(b)standardhasbeentimetestedto
providefairrates(i.e.,reasonablefees)thathavebeenacceptedformorethanhalfacenturyin
manydifferentcontexts,includingratesettingproceedingsunderSections114(f)(1)(B),115,and
116.);DiMASecondNoticeCommentsat21;SiriusXMFirstNoticeCommentsat1314;see also
Tr.at310:0109(June23,2014)(LeeKnife,DiMA).
548
549
DiMASecondNoticeCommentsat20;see alsoMusicChoiceFirstNoticeCommentsat37.
550
DiMASecondNoticeCommentsat2021;see also Tr.at278:21279:02(June23,2014)(Paul

Fakler,NAB/MusicChoice);Tr.at294:0210(June23,2014)(CynthiaGreer,SiriusXM).
551
RIAAFirstNoticeCommentsat25.
552
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bringingsection115withinthewillingbuyer/willingsellerstandardwouldachievethat
goal.553
b. Administrative Burdens
Stakeholdersexpressednearuniversalconcernabouttheinefficienciesofthemechanical
licensingprocess.Thesection115statutorylicensecreatesaperworklicensingmodel;
thesamemodelisemployedwhenseekinglicensesthroughintermediariessuchas
HFA.554Licenseesseekingtoreleaseindividualrecordstypicallyobtainamechanical
licenseforthespecificproductthroughHFAordirectlyfromthepublisher.555But
digitalservicesseekinglargevolumessometimesmillionsoflicensesaremorelikely
torelyonthesection115statutorylicenseforatleastsomeoftheirlicensingneeds.
Consequently,digitalprovidersexpressedconsiderablefrustrationwiththesongby
songlicensingprocess.556
Althoughthestatutorylicensingprocessismorecommonlyrelieduponnowthanithas
beeninthepast,RIAAregardedthisdevelopmentasmerelyanindicationthatmusical
worklicensingissobrokenthatmassuseofthecompulsorylicenseprocessisthebestof
alotofbadoptions.557Inadditiontotheburdenofseekinglicensesforindividual
works,licenseescomplainaboutthelackofreadilyavailabledataconcerningmusical
workownership,asdescribedfurtherbelow.558Digitalservicesassertedthatthe
inaccessibilityofownershipinformationleadstocostlyandburdensomeeffortsto
identifytherightsholdersandpotentiallyincompleteorincorrectlicenses,exposing
themtotheriskofstatutoryinfringementdamagesdespitediligentefforts.559
Anumberoflicenseesalsoobjectedtothedetailedaccountingandpayment
requirementsimposedbysection115.560DiMAnotedthatfordirectlicenseagreements
553
Id.
See, e.g., BMIFirstNoticeCommentsat5;DiMAFirstNoticeCommentsat20;SpotifyFirst

NoticeCommentsat35;RIAAFirstNoticeCommentsat1011.
554
See id.at40(describingthepreviouslyhighvolumeofmechanicallicensesissuedthroughHFA
andtheincreasingpracticeofdirectlicensingfornewsongsandnewalbums).
555
SeeDiMAFirstNoticeCommentsat20(notingthatthecosts[infilingNOIswiththe
CopyrightOffice]canbeoverwhelminggiventhevolumeofworksatissue);Tr.at172:0613
(June16,2014)(LawrenceJ.Blake,ConcordMusic).
556
557
RIAAFirstNoticeCommentsat23n.36.
558
559
Id.at2021.
CTIAFirstNoticeCommentsat13(explainingthatvirtuallyallparticipantsinthemarket
haverecognizedthatthelicensingregimeforthereproductionanddistributionrights,which
requiresspecificmonthlyreportingandpayment,iscomplexandburdensome);LaPoltSecond
560
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forrightsotherwisecoveredbythesection115statutorylicenses,itiscustomaryfor
digitalmusicservicestopayrightsownersonaquarterly basis.561Thestatute,however,
requiresaccountingandpaymentonamonthlybasis,whichincreasesadministrative
burdensandoutofpocketcosts.
c. Perceived Unfairness
Manystakeholdersareoftheviewthatthesection115licenseisunfairtocopyright
owners.Asonesubmissionsummeditup:Thenotifications,statementsofaccount,
licenseterms,lackofcompliance,lackofauditprovisions,lackofaccountability,lackof
transparency,onesizefitsallroyaltyratesandinabilitytoeffectivelyenforcetheterms
ofthelicensedemonstrateacompletebreakdowninthestatutorylicensingsystemfrom
starttofinish.562
Lack of Audit Rights
Thoughtheremaybesignificantpracticallimitationsoncopyrightownersabilityto
exerciseauditrightsduetotheburdenandexpenseofexamininglicensees,563theright
toauditisnonethelesshighlyvalued.Accordingly,thereisaparticularindustry
concernthatsection115doesnotprovidemusicpublisherswiththerighttoverifythe
statementsofaccounttheyreceivefromlicensees.
Section115differsfromotherstatutorylicensesintheCopyrightActinprovidingforan
honorsystemofselfreportingwithoutaverificationprocedure.564Ownersofmusical
works,therefore,havenochoiceotherthantorelyuponusercertifiedroyalty
NoticeCommentsat10;Tr.at234:21235:01(June23,2014)(CherylPotts,CrystalClearMusic&
CleerKut).
561
DiMAFirstNoticeCommentsat22(emphasisinoriginal).See 17U.S.C.115(c)(5).
GearPublgCo.&LisaThomasMusicServs.,LLCFirstNoticeCommentsat56;GeoMusic
Group&GeorgeJohnsonMusicPublgFirstNoticeCommentsat9.
562
MusicChoiceFirstNoticeCommentsat21(Althoughmanycasesarefiledbysongwritersand
recordingartistsforunderpaymentofroyalties,farmorecasesgounlitigated.Thisisbecause,
amongotherreasons,(1)theauditprovisionsintheauthorscontractsareoftenveryrestrictive;
(2)itisveryexpensiveforanauthortohireforensicaccountantstoconductanaudit;(3)oncean
auditbegins,therecordcompanyorpublisherusesvarioustactics,includingaccountingrecords
thatseemdesignedtoobfuscateroyaltyrevenuesreceivedandroyaltiesdue,toimpedetheaudit;
and(4)evenafterunderpaymentsareestablished,authorsoftenmustacceptpenniesonthe
dollarfortheirclaimsbecausethecostoflitigationagainsttherecordcompaniesandpublishers
issohigh.).
563
564
108
U.S.CopyrightOffice
statementsthattheymayfinddifficulttotrust.565Furthercomplicatingthesituationis
thatacompulsorylicenseemaypayallroyaltiestoonecoownerwithoutany
notificationtotheothers.566
Asonestakeholderputit,[a]nauditrightisparticularlynecessaryinthemusic
industrywhichhasanadmittedlylongandstoriedhistoryofdubiousaccounting
practicesandexploitingsongwriters.Everysongwriterdeservesandshouldbeentitled
toastraightcount;selfcertification...isnotsufficient.567Anotherstated,itstrustbut
youcantverify....[W]evegottorelyonthekindnessofstrangersthattheyregoingto
reportaccurately.568
Formanymusicalworkowners,theissueisnotjusttrust,butfairness.Asmusician
DavidLoweryexplained,Ihaveseeninstanceswhereasupposedcompulsorylicensee
hasfailedtocomplywithitspaymentobligationsforyears,ignoredterminationnotices,
andyetisstillabletocontinuetoreceivethebenefitsofnewstatutorylicensesfor
songwriterswhoawaitthesamefate.569Or,asanothersongwriteradvocateconcluded:
Havingbeencompelledbythegovernmenttolicensetheirsongstostrangers,itseems
onlyfairthatthesongwriteratleastbeabletoconfirmtotheirreasonablesatisfaction
thattheyaregettingastraightcount.570
CastleFirstNoticeCommentsat2.Asdiscussedabove,inlieuofrequiringcertifications,the
mechanicallicensingagentHFAinsteadconductsauditsoflicenseesasubstantialbenefitforits
publishermembers.See MichaelSimon,The Basics of Mechanical Licensing from Harry Fox,ARTISTS
HOUSEMUSIC(July12,2007),http://www.artistshousemusic.org/articles/the+basics+of+
mechanical+licensing+from+harry+fox(notingHFAsauditsoflicensees).Butthesection115
licensedoesnotrequirethis.
565
IPACFirstNoticeCommentsat34(Ifthedigitalmusicservicepaysallroyaltiesfortheuseof
amusicalworktoonlyonecoowner,thenthatcoownerisobligatedtopaytheothercoowners
ofthemusicalworktheirrespectiveshareofthemoniesreceived.Thispracticeeffectivelyshifts
tothecopyrightownertheaccountingandpaymentobligationsoftheuser.Thisexamplealso
putscoownersofthemusicalworkwhohavenotreceivedtheNoticeatadisadvantagethese
coownerswilllikelybeunawarethattheirmusicalworksarebeingused,beunawarethat
royaltiesaredue,andbeinadifficultpositionintermsofthatcoownersrightstoauditthe
digitalmusicservice.).
566
RysFirstNoticeCommentsat2.
567
Tr.at209:1720(June16,2014)(KeithBernstein,CrunchDigital).
568
LoweryFirstNoticeCommentsat1;see alsoIPACFirstNoticeCommentsat34.
569
CastleFirstNoticeCommentsat3.
570
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U.S.CopyrightOffice
Whilerecordcompaniesseemedtooffersomesupportfortheabilityofpublishersand
songwriterstoauditmechanicaluses,571digitalservicesobjectedtoanysortof
verificationprocess.Inopposinganauditright,DiMAarguedthattherequired
statementsofaccountalreadyprovideforamethodofselfauditing,andthatauditing
requirementswouldbeburdensomeandfrustratethevalueofthelicenseitself.572In
addition,duetothechallengesofaccountingfordigitalusesunderdifferentlicensing
schemes,DiMAbelievedauditingwouldcauseevengoodfaithactorstoappear
noncompliant.573
Afewpartiesofferedspecificproposalsforanauditrightundersection115.NMPAand
HFAsuggestedamendingsection115toincludeadutytoexchangeandupdateusage
dataonacontinuousbasis.574DavidLowerysuggestedasystemwherebytheCopyright
Officecouldinvestigatelicenseesthatwerenotcompliantwiththeirdutiesunder
section115.575
Administrative Issues
Publishers,songwriters,andlicensingadministratorsemphasizedtheproblemof
noncompliantstatutorylicensees.576Therequirednoticestoobtainastatutorylicense
arefrequentlydeficient,577andlicenseesregularlyfailtotimelyandaccuratelypayand
reportusage.578Duetotheinvoluntarynatureofthelicense,publishersandsongwriters
cannoteasilyavoidtheserisks,as[n]othingintheSection115licenseschemerequires
RIAASecondNoticeCommentsat19(notingthatmajorrecordcompaniessupporttheidea
thatwherethereisdirectlicensing,publishers/writersshouldhaveadirectauditrightwith
respecttothirdpartiesthatusetheirworks).
571
SeeDiMAFirstNoticeCommentsat1920.
572
Id.at21(FordigitalmusicservicesthatrelyonlicensesunderSection115aswellasseparate
licensesforthepublicperformanceofmusicalworks,itisoftenimpossibletodeterminethe
appropriatedeductionformusicalworkpublicperformanceroyaltiesatthetimethataccountings
undertheSection115licensesaredue.Thisisbecausethecalculationofmechanicalroyalty
ratesunderSection115requiresthatpublicperformanceroyaltiesbededucted;andpublic
performanceratesareoftennotdeterminedwhetherbyinterimagreement,finalagreement
orratesettingproceedinguntillongafterthecloseofthemonthduringwhichSection115
royaltiesaredue.).
573
NMPA&HFAFirstNoticeCommentsat910;see alsoKohnFirstNoticeCommentsat11.
574
LoweryFirstNoticeCommentsat34.
575
See, e.g., id.14.
576
CarapetyanSecondNoticeCommentsat1(notingthatthereisabevyoflegallydeficient
NoticesofIntentionthatforcepublishersintotheinvoluntaryroleofteachingthefundamentals
ofcopyrighttothemasseswhichisneitherpracticalnorfairandoftenintheendthecostin
effortandmanhoursfarexceedstheminusculeroyaltiesfortheuse).
577
LoweryFirstNoticeCommentsat2.
578
110
U.S.CopyrightOffice
anyconsiderationofthecreditworthinessortrustworthinessofthecompulsory
licensee.579Manyfoundtherecourseprovidedbystatuteterminationofthelicense
andcostlyinfringementlawsuitsineffective.580
Publishersalsocomplainedaboutregulatoryprovisionsthatpermitpaymentofroyalties
andserviceofNOIsonasinglecoownerofawork,withthatcoownerthenunderan
obligationtoaccounttotheothercoowners.Asonecommenterexplained,[t]his
practiceeffectivelyshiftstothecopyrightownertheaccountingandpayment
obligationsoftheuser.581
Atthesametime,anumberofpartiesassertedthatthecomplexnatureofthestatutory
licensingschemewasunfairtolicensees.Somepointedtothecomplexityofthesection
115royaltyregulationsfordigitalservicesandthefinedistinctionstheydrawamong
differenttypesofservicesasasourceofconfusionastowhatroyaltiesneedtobe
paid.582Digitalservicesalsohighlightedtheonesidedriskofcostlystatutorydamages
shouldtheyfailtoascertainthatafirstuseofaworkhasoccurred(renderingthework
eligibleforstatutorylicensing)andtimelyserveanNOIonthecopyrightowner,even
wheresuchdeterminationisdifficultduetolackofsufficientdata.583
d. Parties Proposals
Elimination of Statutory License
Songwritersandpublishersappearalmostuniversallytofavortheeliminationofthe
section115statutorylicense,albeitwithanappropriatephaseoutperiod.584Theyassert
thatthestatutoryregimecreatesanartificialstatus quothatprecludesaprivatemarket
fromdeveloping.585Musicalworkownerspredictthattheeliminationofalicensewould
allowafunctioninglicensingmarket...[to]flourish.586
579
Id.at23;see alsoNMPA&HFAFirstNoticeCommentsat15.
See, e.g.,CastleSecondNoticeCommentsat3([A]defaulterunderthestatutorylicensecan
lawfullycontinuesendingNOIsforfuturelicenseseveniftheyhaveneverpaidadimeonpast
licensestheonlyrecourseasongwriterhasinthiscaseisterminationandifthattooisignored,
extraordinarilyexpensivefederalcopyrightlitigation.).
580
IPACFirstNoticeCommentat3;see also RysFirstNoticeCommentsat2.
581
SeeDiMAFirstNoticeCommentsat22(observingdifferencesbetweentheroyaltyrate
structuresforsomecurrentratecategories).
582
Id.at21.
583
See, e.g.,NMPA&HFAFirstNoticeCommentsat8;NSAISecondNoticeCommentsat7;IPAC
FirstNoticeCommentsat4.
584
See ABKCOFirstNoticeCommentsat1(ThefreemarketisstifledunderSection115licensing
requirementswithgovernmentcontrollingrateswhichtherebylimitsandinhibitssectorgrowth
585
111
U.S.CopyrightOffice
Digitalmusicservices,however,assertthatthesection115licenseisbothimportantand
fair,asitprovidesanessential counterbalance to the unique market power of copyright rights
owners...byprovidingamechanismforimmediatelicensecoverage,therebynegating
therightsownersprerogativetowithholdthegrantofalicense.587Thus,some
licenseesviewsection115asaprotectionagainstmonopolypowerthatallowsthepublic
toenjoymusicalworkswhilestillcompensatingcopyrightowners.588Spotifyargued
thatthefreemarketisnotstifledbythestatutorylicense,butthatsection115instead
actsasanindispensablecomponenttofacilitatingavibrantmarketplaceformaking
millionsofsoundrecordingsavailabletothepubliconcommerciallyreasonable
terms.589
Blanket Licensing
Inlightofthewidelyperceivedinefficienciesofsongbysonglicensingofmechanical
rightsparticularlyascomparedtothecollectiveapproachofthePROsawiderange
ofstakeholderssuggestedthatablanketsystemwouldbeasuperiormeansoflicensing
mechanicalrights.590AsRIAAnoted,blanketlicensingavoidstheadministrativecosts
associatedwithnegotiatingandmanaginglargenumbersoflicensesofvaryingterms
andprovidesawayforlegitimateservicestoavoidinfringementrisk.591Similarly,the
publisherABKCOopinedthatblanketlicenseagreementswouldfacilitatetheuseof
musicandwouldhelplicenseesfulfillnotificationandreportingobligations.592IPAC
andinnovation.);MMF&FACSecondNoticeCommentsat1415;RIAASecondNotice
Commentsat45;PipelineProjectSecondNoticeCommentsat16.
NMPA&HFAFirstNoticeCommentsat7;see alsoIPACFirstNoticeCommentsat6.
586
DiMAFirstNoticeCommentsat19(emphasisinoriginal).
587
ModernWorksMusicPublishingSecondNoticeCommentsat3(explainingthatsection115is
anantitrust provisionthatacceleratestheentryofmusicalworksintothepublicsphere,while
ensuringthatcopyrightholdersarepaid.)(emphasisinoriginal).
588
589
See, e.g.,NARASFirstNoticeCommentsat34;DiMAFirstNoticeCommentsat1617;IPAC
FirstNoticeCommentsat67;BMIFirstNoticeCommentsat5;ASCAPFirstNoticeCommentsat
3031.In2006,theHouseSubcommitteeonCourts,theInternet,andIntellectualProperty
consideredSIRA,legislationthatwouldhavecreatedablanketlicensefordigitalusesunder
section115.WhileSIRAenjoyedsupportfromsomekeystakeholdersandwasapprovedbythe
subcommittee,itwasnotpassedoutofthefullcommittee.See Reforming Section 115 Hearingat4
(statementofRep.HowardCoble)(detailinglegislativehistory);Mitchell,Reforming Section 115:
Escape from the Byzantine World of Mechanical Licensingat1277(describingsupportforSIRA).
590
591
592
ABKCOFirstNoticeCommentsat12.
112
U.S.CopyrightOffice
suggestedthatblanketlicensingcouldbeimplementedthroughthecreationofoneor
morelicensingagencies.593
Tohighlightthecomplexityoflicensinginthemodernmusicmarketplace,RIAA
describedtheexperienceofoneofitsmembers,whichhadreleasedaverysuccessful
album,andhadtoobtainforthatalbum1481licensesforthereleaseofthreephysical
products,the92digitalproducts,the27songsacrossthe51songwriterswithatotalof
89shares.594Oneofthosesharesrepresented[a]1.5percentinterestinasong,and
thereweretwopublishersforthat.595AccordingtotheRIAA,apartfrommultiple
songwriterinterests,oneofthereasonsforthisexplosioninlicensingcomplexityisthe
increasedcomplexityofthereleasesthemselveswhereasinthepastarecordlabel
releaseconsistedofadiskandsomelinernotes,todayitcomprisesmultipledigital
formats,differentkindsofaudiovisualpresentations,anddifferentkindsofmusic
services.596
Inlightofitsbeliefthattheseproblemscannotbesolvedbypiecemealefforts,RIAA
proposedfundamentallyrestructuringperformanceandmechanicallicensingfor
musicalworks.597UndertheRIAAproposal,recordlabelswouldreceiveacompulsory
blanketlicensecoveringallrights(performance,mechanical,andsynch)necessaryfor
whatRIAAcallsmodernmusicproducts,includingaudiovisualproductslikemusic
videos,videoswithalbumartorlinernotes,andlyricvideos.598TheratecourtandCRB
wouldbeeliminated.Instead,therecordlabelsandpublisherswouldagreeuponsplits
ofrevenuesreceivedbytherecordlabelsfromtheirsaleandlicensingofrecorded
music.Therecordcompanieswouldhavesoleresponsibilitytosellandlicensethose
products;thosedealswouldbenegotiatedbythelabelsinthemarketplace(exceptfor
usesfallingunderthesection112and114licenses).599RIAAbelievedthatitsproposal
wouldachievefairmarketratesforpublishersandsongwriterswhileretainingthe
benefitsofacollectivelicensingsystem,suchassimplifiedlicensingandlower
administrativecosts.600
IPACFirstNoticeCommentsat67.
593
Tr.25:1116(June4,2014)(StevenMarks,RIAA).
594
Id. at25:1618.
595
Id. at24:0426:18.
596
597
Id.at16.RIAAmadeclearthatitsproposedblanketlicensewouldnotcoverotherusesof
musicalworks,likesynchrightsformovie,television,andadvertising,performanceswithinlive
venue,standalonelyrics,andsheetmusic.Id.at17.
598
Id.at1518.
599
Id.at1822.
600
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U.S.CopyrightOffice
ButpublishersandsongwritersvigorouslyresistedRIAAsproposal,arguingthatit
wouldmerelyshiftcontrolovermusicalworksfromsongwritersandmusicpublishers
torecordlabelssincethelabelswouldthenbeinchargeoflicensingdecisionsand
royaltyrates.601Theyalsoexpressedconcernaboutbringingaudiovisualworksorother
rightscurrentlyoutsideofthecompulsorysystemunderastatutoryblanketlicense.602
NMPAcharacterizedtheRIAAsproposalasseekingtoexpandthescopeoftheSec.
115compulsorylicensetoauthorizealmostallformsofexploitationofasound
recording,including,amongotherthings,recordlabelcreatedvideos,andfirstuse
rights.603
3. Sections 112 and 114

Ascomparedtoissuesrelatingtothelicensingofmusicalworks,concernsregardingthe
section112and114statutorylicenseswererelativelymodest.
a. Royalty Rates
Soundrecordingownersappeargenerallysatisfiedwiththesection112and114ratesset
underthewillingbuyer/willingsellerstandard.604A2IM,inparticular,appreciatesthat
theCRBsprocesstreatsallsoundrecordingsthesameforratesettingpurposes.605
CFAandPublicKnowledge,however,assertthatsection112and114royaltiesare
muchtoohigh,pointingtothefactthatPandorahadyettodemonstratesustained
profitability.606DiMAsimilarlycontendedthatthewillingbuyer/willingseller
NMPASecondNoticeCommentsat3233; see alsoTr.at245:1220(June24,2014)(Peter

Brodsky,Sony/ATV).
601
LaPoltSecondNoticeCommentsat14;NMPASecondNoticeCommentsat3235;NSAI
SecondNoticeCommentsat8;see alsoTr.at214:1420(June16,2014)(JohnBarker,IPAC);Tr.at
246:21247:09(June24,2014)(PeterBrodsky,Sony/ATV).
602
NMPASecondNoticeCommentsat32.
603
RIAAFirstNoticeCommentsat32(Allservicesoperatingunderthestatutorylicensesshould
payfairmarketroyaltiessetunderthewillingbuyer/willingsellerstandard.).Incontrast,RIAA
criticizedthebelowmarketroyaltyratessetunderthesection801(b)(1)standardfor
grandfatheredservices.Id. at31.
604
605
CFA&PublicKnowledgeFirstNoticeCommentsat8.Pandoradidreportamodestprofitin
Q3,2013,butitscurrentstrategyisfocusedonexpansion.RomainDillet,Pandora Beats, Q3 2013
Revenue Up 60% to $120M, Net Income of $2.1M; Q4 Forecast Much Lower Than Expected,
TECHCRUNCH(Dec.4,2012),http://techcrunch.com/2012/12/04/pandorasq32013/;PANDORA
MEDIA,INC.,QUARTERLYREPORT(FORM10Q)21(Oct.28,2014),http://investor.pandora.com/
phoenix.zhtml?c=227956&p=irolsec(clickonOct.28,2014filing)([W]eexpecttoincurannual
netlossesonaU.S.GAAPbasisintheneartermbecauseourcurrentstrategyistoleverageany
improvementsingrossprofitbyinvestinginbroadeningdistributionchannels,developing
606
114
U.S.CopyrightOffice
standardyieldsratesthatarehighandunsustainableandthatnumerousservices,
includingthoseoperatedbyAOL,Yahoo!,EastVillageRadio,Turntable.fm,Loudcity,
RadioParadise,and3Wk,haveexitedthebusinessasaresult.607
DiMAalsocriticizedtheCRBsimpositionofperperformanceratesforinternetradio,
suggestingthatsucharatestructureshouldnotbeappliedincircumstanceswherethe
higherusagedoesnotequatetohigherrevenuesforthedigitalmusicservice
provider.608DiMAandothersadditionallyobservedthatCongressfeltcompelledto
offerrelieftointernetradioservicescomplainingofhighratesunderthewilling
buyer/willingsellerstandardbypassingtheSmallWebcasterSettlementActof2002and
theWebcasterSettlementActsof2008and2009toallowfornegotiatedalternativesto
theCRBsetrates.609
b. Interactive/Noninteractive Divide
Stakeholdersexpressedanumberofconcernsregardingeligibilityforthesection112
and114licenses.
Asdiscussedabove,interactiveservicesarenoteligibleforthestatutorylicensesunder
sections112and114,thoughintheSecondCircuits2009Launch Mediadecision,the
courtconcludedthatacustomradioserviceonethatreliesonuserfeedbacktoplaya
personalizedselectionofmusicisnotaninteractiveservice.610Asaresult,custom
radioservicessuchasPandoraaretreatedasnoninteractiveandoperateundersection
112and114licenses.
CopyrightownersexpressedconcernthatcustomizedInternetradiohasapproached
interactivityineverysenseofthewordexceptundertheoutdatedrequirementsofthe
statutorydefinition.611RIAAsimilarlyopinedthatLaunch Media allbutextinguished
voluntarylicensingofpersonalizedstreamingservicesatapremium[above]the
statutoryrate.612Notably,however,soundrecordingownersdidnotnecessarilyfavor
innovativeandscalableadvertisingproducts,increasingutilizationofadvertisinginventoryand
buildingoursalesforce.).
607
DiMAFirstNoticeCommentsat33n.76.
608
Id.at36.
Id.at37;EducationalMediaFoundation(EMF)FirstNoticeCommentsat78;SiriusXMFirst
NoticeCommentsat14;SpotifyFirstNoticeCommentsat12.
609
610
See 17U.S.C.114(d)(2)(A)(i);Launch Media, 578F.3d148.
611
ASCAPFirstNoticeCommentsat44; see also BMIFirstNoticeCommentsat22.
612
115
U.S.CopyrightOffice
movingpersonalizedservicesoutofthestatutorylicense.613Instead,theyadvocatedfor
amiddletierofroyaltyratesforpersonalizedradioservicesunderthestatutory
license.614
Otherparticipantsarguedforexpansionofthestatutorylicensingframeworktocover
additionalservices.615Forinstance,A2IMfavorednarrowingthedefinitionof
interactiveservicetocoveronlythoseservicesthattrulyofferafullondemand
interactiveexperience.616SAGAFTRAandAFMalsosupportedsuchanexpansion,as
[a]rtistswillcontinuetobenefitmostfairlyfrom[customizedservices]through
receivinganequalshareoftheproceeds,paidtothemdirectlyandtransparentlyby
SoundExchange.617
Inadditiontotheinteractive/noninteractivedistinctionofsection114,concernswere
raisedaboutthesoundrecordingperformancecomplementwhichlimitsthenumber
ofplaysofasinglefeaturedartistorfromaparticularalbuminathreehourperiodas
wellassection114sbanonthepreannouncementofsongs.618Broadcasterssaidthat
theserequirementsfrustratesimulcastingactivitiesofterrestrialradiostationsthatdo
notadheretotheserestrictionsintheirovertheairbroadcasts.619NABcontendedthat
thesoundrecordingperformancecomplementmerelyserve[s]asabargainingchipfor
leverageinthenegotiationswithbroadcasters,duesolelytotheundueburdensuch
restrictionsplaceonradiostationsthatseektostreamtheirbroadcasts,620andpointed
outthatrecordlabelsregularlygrantbroadcasterswaiversoftherestrictionasevidence
thattherecordlabelsdonotneedtheseprovisionstoprotecttheirinterests.621NPR
notedtheupstreameffectofthelimitation,explainingthatbecausepublicradiohas
limitedresources,itisforcedtocreateseparateprogrammingdependingonthe
methodbywhichitwillbedistributed.622
Seeid.([A]tthisjuncture,wedonotnecessarilyadvocateexcludingfromthestatutorylicense
servicesthathavebeengenerallyacceptedasoperatingwithinthestatutorylicensebasedonthe
Launch decision.).
613
614
ABKCOFirstNoticeCommentsat3;see alsoRIAAFirstNoticeCommentsat34.
615
SiriusXMFirstNoticeCommentsat2021.
616
SAGAFTRA&AFMFirstNoticeCommentsat6(notehowever,thatSAGAFTRA&AFMalso
supportincreasedratesifaservicehasincreasedfunctionality).
617
17U.S.C.114(d)(1)(C)(iv),(d)(2)(B)(C),(j)(13).
618
NABFirstNoticeCommentsat45;NPRFirstNoticeCommentsat5;SRNBroadcastingFirst
NoticeCommentsat1.
619
620
621
Id.at5.
622
NPRFirstNoticeCommentsat5.
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c. Technical Limitations of Section 112

Anumberofdigitalservicescriticizedtechnicallimitationsontheavailabilityofthe
section112licensethatappliestotheephemeral(i.e.,server)copiesneededtofacilitate
theirtransmissions.623Forexample,somelicenseescriticizedtherequirementthatthe
licenseedestroysuchcopieswithinsixmonthstimeasunreasonableandarchaic
andonethathasnobenefitforrightsholders.624NABnotedthatthisrequirementis
particularlyillogicalasservercopiesarenotmeanttobetemporary.625DiMA
suggestedthatsection112shouldbesubstantiallyupdatedtoreflectmodernrealitiesof
digitalmusicservices.626Otherssuggestedthatanyephemeralcopiesmadein
furtheranceofapublicperformanceshouldbeexemptedentirely.627
RIAAopposedablanketexemptionforephemeralrecordings,explainingthatthose
recordingshavevaluebyprovidingserviceswithimprovedqualityofservice,
operationalefficienciesorothercompetitiveadvantages.628RIAAalsoobservedthat
[t]hecurrentstatutoryschemereplicatesmarketplaceagreementsforsoundrecordings,
inwhichlicenseescommonlyacquireperformanceandrelatedreproductionrightsina
singletransactionandpayabundledroyaltythatcoversbothrights.629
d. Lack of Termination Provision

SoundExchangeopinedthatwhilethesection112and114licensingframework
generallyworkswell,noncompliancewiththestatutoryrequirementsbyirregular
orinaccuratepaymentsormissingorincompletereportingiscommonplace.630
SoundExchangedescribeditseffortstobringservicesintocompliance,butalso
expresseditsbeliefthatthesection112and114systemneedsaclearmechanismfor
terminationofstatutorylicensesforservicesthatrepeatedlyfailtoactincompliance
withapplicablerequirements,suchastheonethatexistsundersection115.631
Ephemeralrecordingsarecopiesthataremadeandusedbyatransmittingorganizationto
facilitateitstransmittingactivities.U.S.COPYRIGHTOFFICE,DMCASECTION104REPORT144
(2001),available athttp://www.copyright.gov/reports/studies/dmca/sec104reportvol1.pdf.
623
CTIAFirstNoticeCommentsat1618;DiMAFirstNoticeCommentsat35;DiMASecond
NoticeCommentsat18.
624
625
NABFirstNoticeCommentsat7;MusicChoiceFirstNoticeCommentsat13.
626
DiMASecondNoticeCommentsat18.
627
See, e.g.,NABFirstNoticeCommentsat2;SiriusXMFirstNoticeCommentsat910.
628
629
Id.at32.
630
SoundExchangeFirstNoticeCommentsat2,5.
631
Id.at5;see also17U.S.C.115(c)(6)(terminationprovisionundersection115).
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e. Royalty Distribution Process

Unlikesection114whichprovidesastatutoryformulaforthedirectdistributionof
royaltiesbySoundExchangetoartists,recordlabelsandmusicianstherelatedsection
112licensecontainsnosuchrequirement.Somesubmissionssuggestedthatthe
royaltiescollectedbySoundExchangeasthedesignatedagentunderthesection112
licenseshouldbedistributedtoartistsdirectly,asundersection114,ratherthanthrough
recordlabels.632MusicChoicecommentedthat,[d]uetothetermsoftheiragreements
withtherecordcompaniesandvariousrecordcompanyaccountingpractices...thevast
majorityofrecordingartistsneverseeapennyoftheportionoftheperformanceroyalty
allocatedtotheSection112license.633
Inaddition,section114currentlydoesnotallocateashareofroyaltiestorecord
producers,sothereisnostatutorymandatefordirectpaymenttoproducers.Instead,
individualcontractsbetweenrecordingartistsandproducersprovideforproducer
compensation,whichmayincludeashareofroyalties.634SoundExchangehasbegun
processingdirectpaymentoftheproducersshareofperformanceroyaltiesona
voluntarybasiswhenitreceiveswrittenauthorizationfromthefeaturedartist.635
NARAShasproposedtomakethisprocessaconsistentandpermanentfeatureof
section114.636
4. Public and Noncommercial Broadcasting

Asdiscussedabove,theactivitiesofpublicandnoncommercialeducationalbroadcasters
aresubjecttotwodifferentstatutorylicensesaswellasPROlicensingandratesetting.
Noncommercialbroadcasterscomplainaboutthedivergentlicensingmechanismsfor
thevariousmusicrightstheymustacquire.Noncommercialreligiousbroadcasters
observedthat,toclearmusicalworksrights,theycouldberequiredtoparticipateina
CRBproceedingundersection118forovertheairtransmissions,tworatecourt
proceedingsundertheconsentdecreesfordigitaltransmissionsofASCAPandBMI
works,andprivatenegotiationfordigitaltransmissionsofSESACworks.637Inaddition,
632
SeeMusicChoiceFirstNoticeCommentsat13;ResnickSecondNoticeCommentsat1.
633
MusicChoiceFirstNoticeCommentsat13; see also ResnickSecondNoticeCommentsat1.
634
See NARASFirstNoticeCommentsat5.
2013 Letter of Direction,SOUNDEXCHANGE(Apr.14,2013),https://www.soundexchange.com/

wpcontent/uploads/2013/05/LetterofDirection041413.pdf(2013 SoundExchange Letter of
Direction).
635
636
637
NRBNMLCFirstNoticeCommentsat1415.
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ascertainingtheratefordigitalperformancesofsoundrecordingsrequiresparticipation
inyetanotherCRBratesettingproceedingundersection114.638
Noncommercialbroadcastersthusseektoexpandthesection118licensetoencompass
allmusicelements.639Noncommercialreligiousbroadcastersproposed,inparticular,
[f]oldingdigitaltransmissionsofmusicalworksintotheexistingsection118license
applicabletobroadcasttransmissions.640NPRadvocatedforafurtherstep:broadening
thesection118licensetoencompassallknownandyettobecreateddistribution
methodsandtechnologies,includingphysicalproductsandpermanentdigital
downloads.641
Finally,noncommercialbroadcastersseektoensurethatthepolicyoriented801(b)(1)
ratesettingstandardwillapplytoanyexpandedversionofthesection118license.642
5. Concerns Regarding CRB Procedures

Aswiththeratecourts,manystakeholdersexpressedconcernabouttheCRBratesetting
processmanyofwhicharegovernedbydetailedstatutoryprovisions643including
specificconcernsregardingdiscoveryprocedures,thesettlementprocess,andbifurcated
proceedings.
a. Inefficiencies and Expense

Copyrightownersandlicenseestogethercomplainedabouttheinefficiencyandhigh
costofproceedingsbeforetheCRB.644RIAAandSoundExchangesuggestedthatone
waytoreducecostswouldbetosimplifytheratestandardsandmovetoa
EMFFirstNoticeCommentsat89(notingreasonsnoncommercialbroadcastersareunlikelyto
settleinsection114proceedings).
638
639
NPRFirstNoticeCommentsat7.
640
NPRFirstNoticeCommentsat7; see also PublicTelevisionCoalition(PTC)FirstNotice

Commentsat11.
641
See NRBNMLCFirstNoticeCommentsat16.Whilethe801(b)(1)reasonabletermsandrates
standardcurrentlyappliesundersection118,soundrecordingusesundersection114(d)are
subjecttothewillingbuyer/willingsellerstandard.17U.S.C.114(d),801(b)(1);
NoncommercialEducationalBroadcastingCompulsoryLicense,63Fed.Reg.49,823,49,824(Sept.
18,1998)(notingtheratestandardforsection118isreasonabletermsandrateswithnofurther
statutorycriteria,butthelegislativehistoryofsection118indicatedthattherateshouldreflect
thefairvalueofthecopyrightedmaterial).
642
643
See 17U.S.C.801et seq.
See, e.g.,ASCAPFirstNoticeCommentsat24n.31;MusicChoiceFirstNoticeCommentsat29
31;RIAAFirstNoticeCommentsat36;SiriusXMFirstNoticeCommentsat17.
644
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U.S.CopyrightOffice
straightforwardwillingbuyer/willingsellerratestandardacrosstheboard.645
SoundExchangenotedthat[r]elativetoastreamlinedfairmarketvaluestandard,every
specificfactorincludedinaratestandardincreasescostanddecreasespredictability.646
Stakeholdersalsopointedtothebifurcatedratesettingprocedurescontemplatedby
statutewhichreferencesseparatedirectandrebuttalphasesofratesettinghearings647
asasignificantandcostlyinefficiency,648creatingatwoshipspassinginthenight
qualitytotheproceedings.649Therewasbroadsupportforeliminatingthebifurcated
natureoftrialsbeforetheCRBbecause[b]ifurcationoffersnoadvantagesorefficiencies
indiscovery,comprehensionofcomplexissues,savingsinjudicialresources,or
eliminationofduplicativepresentationsofevidence.650
Anothershortfallofthesystemisthattherateadjustmentprocessoccursonlyonce
everyfiveyears.Partiesrepresentingbothcopyrightownersandmusicusersfoundthe
processslowandinsufficientlyresponsivetonewanddevelopingtechnologiesand
services.651Becauseratesettingoccursonlyonaperiodicbasis,copyrightownersand
usersmustattempttopredictandaccommodateeachtypeofservicethatmightarisein
theupcomingfiveyearperiod.652Forinstance,asRIAArecounted,[t]heSection115
ratesettingprocess...resultedinarateschedulewith17differentratecategories,and
inwhichpublishersandsongwriterscanreceivevaryingpercentagesoftherelevant
contentroyaltypoolbasedonthosecategories,causingtheadministrationofpayments
tobeexceedinglycomplex.653
See, e.g.,RIAAFirstNoticeCommentsat36;SoundExchangeFirstNoticeCommentsat68.
645
SoundExchangeSecondNoticeCommentsat10;see alsoRIAASecondNoticeCommentsat43
(notingasinglefactorratestandardasapossiblestreamliningmeasure).
646
17U.S.C.803(b)(6)(C).
647
NABFirstNoticeCommentsat19&n.11;SiriusXMFirstNoticeCommentsat17.
648
MusicChoiceFirstNoticeCommentsat30;see SiriusXMFirstNoticeCommentsat17(same).
649
650
SeeBMIFirstNoticeCommentsat27;DiMAFirstNoticeCommentsat23;RIAAFirstNotice
Commentsat45;Tr.at256:0206(June16,2014)(JasonRys,WixenMusicPublishing).
651
KohnFirstNoticeCommentsat14(referencingtheunnecessarilycomplexsetofindividual
rateregimesforthevarioususescontemplatedbySection114byvariouskindsofdefined
transmitters).
652
RIAAFirstNoticeCommentsat24; see also id.at1112(furthernotingfrustrationswith
mechanicalroyaltyratesetting).
653
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b. Settlement Obstacles
Intheory,CongressdesignedtheCRBprocedurestofacilitateandencouragesettlement
ratherthanadministrativeratesettingbytheCRB.Severalstakeholders,however,noted
practicalandproceduralhurdlestheyhaveencounteredinfinalizingsettlements.
ThemostcommonstakeholderpleawastomodifytheCRBprocesssotheJudgeswould
actquicklyonanysettlement.654Stakeholderscomplainedthatevenwhereasettlement
isreached,theCRBhasdelayedrulingonthesettlement,655sometimesadoptingthe
settlementonlyaftertheproceedingswereconcluded.656RIAAalsoobservedthatdelay
ofsettlementhasfrustratedthebusinessplansofservices.657MusicChoiceconcurred
thatdelaysduringthevoluntarynegotiationperiodleaveinadequatetimeforpartiesto
conductrateproceedings.658
Toaddresstheseissues,SoundExchangeproposedbypassingCRBapprovalof
settlementsbygrantingthesection112and114designatedagent(i.e.,SoundExchange)
theauthoritytoenterintooptinsettlementagreementsforastatutorylicense.659It
furthersuggestedthattheCRBcouldberequiredtoadoptanegotiatedsettlementeven
ifitwouldnotfullyresolveacase.660SoundExchangealsosurmisedthatpartiesmaybe
reluctanttosettlebecausethenegotiatedratemaybeusedasabenchmarkorotherwise
inratedeterminations,andsuggestedthatpartiesbepermittedtodesignatesettlements
asnonprecedential.661
c. Discovery Process
Musicservicescriticizedthediscoveryprocessthatappliestoratesettingproceedings
beforetheCRBontwogrounds.First,theyobservedthatbecausethestatutespecifies
thatdiscoveryoccursonlyafter thesubmissionofthepartiesdirectcasescontraryto
theordinarypracticeincivillitigationpartiesarerequiredtoassumewhattheywill
See, e.g.,Tr.at141:1621(June16,2014)(TeganKossowicz,UMG)(Withrespecttoanearlier
mentionoftheimplementationofCRBsettlements,theyshouldbeexpeditedwhenpossible,and
thatdoesntjustpertaintoboththesesections,butaswellasotherproceedingsthatwemayhave
inthefutureonlicensing.).
654
Tr.at99:16100:03(June16,2014)(BradPrendergast,SoundExchange);Tr.at129:17130:03
(June23,2014)(StevenMarks,RIAA).
655
SoundExchangeFirstNoticeCommentsat9n.12;Tr.at122:1522(June23,2014)(Colin
Rushing,SoundExchange).
656
657
658
659
Id.at9.
660
Id.at10.
661
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developduringdiscoveryandhopethatrelevantinformationwillbevoluntarily
revealedbytheiropponentintheopponentswrittencase.662Licenseesbelievethatthis
processputsthematadisadvantage,becausemuchoftheinformationregarding
benchmarkratesisheldbycopyrightowners.663Inaddition,thestatutoryprocedures
limitdiscoverytodocumentsdirectlyrelatedtothedirectstatements.664Licensees
suggestedthatthisruleallowscopyrightownerstobehavestrategicallyintheirown
directstatementandthuslimitdiscovery.665
Musicprovidersalsocomplainedaboutthestatutorylimitsondiscovery.666While
recognizingthehypotheticalbenefitsofastreamlineddiscoveryprocess,someobserved
thattherearenoactualcostsavingsandtherestrictionsarenotfair.667Accordingto
licensees,the60daydiscoverywindowistooshort,668andthestatutorylimitof25
interrogatoriesand10depositionsforallpartiesoneachsideisinsufficient.669Other
discoveryrelatedsuggestionsincludedadoptionofastandardizedblanketprotective
orderthatwouldbeimplementedfornonpublic,commerciallysensitiveinformation
producedindiscoveryandsubmittedasevidence.670NABalsosupporteduseofthe
FederalRulesofCivilProcedureandFederalRulesofEvidence,withslight
modifications,forCRBproceedings.671
Inresponsetotheseconcernsaboutdiscovery,copyrightownersarguedthatthe
commentingpartiesdidnotidentifyanyinstanceinwhichtheJudgesbelievedthe
662
Seeid.at3839;MusicChoiceFirstNoticeCommentsat2930;SiriusXMFirstNotice
Commentsat1516;Tr.at104:10105:12(June16,2014)(GaryR.Greenstein,WilsonSonsini
Goodrich&Rosati).
663
17U.S.C.803(b)(6)(C)(v).
664
MusicChoiceFirstNoticeCommentsat29;SiriusXMFirstNoticeCommentsat16.
665
See17U.S.C.803(b)(6).
666
MusicChoiceFirstNoticeCommentsat29;Tr.at208:19209:07(June4,2014)(LeeKnife,
DiMA).
667
DiMAFirstNoticeCommentsat38;see alsoNABFirstNoticeCommentsat20(supporting
longerdiscoveryperiods);SiriusXMFirstNoticeCommentsat1617(same).
668
DiMAFirstNoticeCommentsat3839;see alsoMusicChoiceFirstNoticeCommentsat30
([G]iventhenumberofwitnessesandthenumberofparticipantsinmostproceedings,the
CopyrightActslimitationondepositionstotenperside(spreadbetweendirectandrebuttal
discovery)isclearlyinsufficient.).
669
NABFirstNoticeCommentsat3;MusicChoiceFirstNoticeCommentsat31(Thecostof
participationinrateproceedingsshouldnotincludetheriskthatconfidentialbusiness
informationmaybepubliclydisclosed.Astandardizedblanketprotectiveorder,similartothat
employedbytheTrademarkTrialandAppealsBoard,wouldbehelpful.).
670
671
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currentprocedurespreventedafullrecordfrombeingdeveloped,672andaddedthat
openendeddiscoverywouldaddtothecomplication,expense,orinefficiencyof
proceedings.673Atthesametime,copyrightownersagreedthatconductingdiscovery
upfrontcouldbehelpful,alongwitheliminatingthebifurcatednatureofCRB
proceedings.674
C. Licensing Efficiency and Transparency

1. Music Data
a. Lack of Reliable Public Data
Basedontherecordinthisproceeding,therecanbelittledoubtthatthecurrentmusic
licensinglandscapeisseverelyhamperedbythelackofpubliclyaccessible,authoritative
identificationandownershipdata.675Thereareseveralfacetstothisproblem.
Tobeginwith,thereisalackofcomprehensiveandreliableownershipdata,particularly
formusicalworks.AsRIAAnoted,itisdifficulttoidentifyandkeeptrackofmusical
workownershipduetochangeswhenmusicalworksandcatalogschangehands.676
Furthercomplicatingthesituationisthattherightstomusicalworksareoftensplit
amongmultiplesongwriters,withdifferingpublishersandPROs,makingmusicalwork
datahardertotrackandmaintain.677
Inaddition,digitalmusicfilesoftendonotincludethestandardidentifiersforthe
copyrightedworksthefilesembodyi.e.,theISRCforthesoundrecordingandthe
ISWCfortheunderlyingmusicalwork.678EvenwhenthefileincludestheISRC,asis
672
Tr.at115:20116:07(June4,2014)(StevenMarks,RIAA);see SoundExchangeSecondNotice
Commentsat10.
673
Tr.at107:19108:22(June4,2014)(StevenMarks,RIAA);see RIAASecondNoticeCommentsat
43(favoringearlierdisclosureofafocusedsetofcriticalinformation).
674
See, e.g., RIAAFirstNoticeCommentsat17,20,22;NMPA&HFAFirstNoticeCommentsat
1012;PeterMenellFirstNoticeCommentsat2;PublicKnowledge&CFAFirstNoticeComments
at28;RMLCFirstNoticeCommentsat79;TMLCFirstNoticeCommentsat16;SpotifyFirst
NoticeCommentsat11;IPACSecondNoticeCommentsat2;Music Licensing Hearingsat7172
(statementofJimGriffin,OneHouseLLC).
675
676
SeeSpotifyFirstNoticeCommentsat4.
677
DiMASecondNoticeCommentsat6(NeitherISRCCodesnorISWCCodesareappliedtoall
works,noraretheyapplieduniformlyorcorrectly,evenwhentheyareattachedtowork.);but
compareTr.at382:2022(June23,2014)(AndreaFinkelstein,SME)(Iwouldsayforthemajors,
everythingthatisindigitalreleasehasanISRCassociated.),withMMF&FACSecondNotice
678
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U.S.CopyrightOffice
nowcommonplacefornewreleases,theISWCfortheunderlyingmusicalworkisoften
notyetassignedatthetimeofinitialrelease.679AndevenafteranISWChasbeen
obtainedbythemusicalworkowner,thereisnocomprehensive,publiclyaccessible
databasethatcanbeusedtomatchtheISRCtotheISWC.680Googlenotedthatrequiring
licensorstosupplydatahelpstoidentifyexactlywhatitistheyarelicensing...both
fromadealimplementationstandpointaswellasadealvaluationstandpoint,adding
thatthosesortofdatarequirements...worktheirwaybackupthechain,tothe
creators.681
BeyondtheISRCandISWC,thereisalsoalackofuniversalanduniformdatatoidentify
songwritersandrecordingartistsassociatedwithindividualworks.Whileaglobal
identifierforcreatorstheISNIhasbeencertifiedbyISOtoreplaceoldersystems
employedbythePROsandothers,itisnotyetwidelyused.682
Theseshortcomingscauseseriousinefficiencies.Licenseesexpendsignificanteffort
attemptingtoidentifyparticularsoundrecordingsandthemusicalworkstheyembody,
aswellastrackingdowntheircopyrightowners.Becausethereisnocentralizeddata
resource,stakeholdersdevotesignificantresourcestomaintainingredundantandoften
inconsistentdatabasesofmusicalworkownershipandsplitinformation.683Digital
servicesnotedthatthelackofanauthoritativesourceofdataexposesevenwell
intentionedactorstopotentialstatutorydamagesforinadvertentlydistributingworks
withoutrequisiteauthorization.684AccordingtoDiMA,thisriskisinequitablebecause
copyrightownersinadequatelyidentifythemselvesandtheirworks.685
Commentsat29(ContrarytooraltestimonytotheNewYorkRoundtableinJune,the[ISRC]has
not,inourexperience,achievedthepenetrationthatisseenwithISWC.).
SeeTr.at336:1719(June23,2014)(AndreaFinkelstein,SME)(No,wedonthaveISWCs,and
wecertainlydonthavethematthatpoint[whenasoundrecordingissenttoadigitalservice
provider].).
679
CCIASecondNoticeCommentsat2([A]lthoughIndustryStandardRecordingCodes(ISRCs)
haveexistedformorethantwodecades,thereisstillnotarecordeddatabaseofthem.);Tr.at
345:0506(June23,2014)(AndreaFinkelstein,SME)(Thereis[anISRCdatabase]cookingat
SoundExchange.).
680
Tr.at53:0917(June23,2014)(WaleedDiab,Google/YouTube).
681
SeePipelineProjectSecondNoticeCommentsat5;Tr.at516:0209(June23,2014)(BobKohn,
KohnonMusicLicensing);Tr.at558:1114(June23,2014)(LynnLummel,ASCAP);see also ISNI,
http://www.isni.org(lastvisitedJan.30,2015).
682
RIAASecondNoticeCommentsat32;see alsoNMPA&HFAFirstNoticeCommentsat1011.
683
MenellFirstNoticeCommentsat2.
684
DiMAFirstNoticeCommentsat17,29.
685
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CommentersalsoreferencedtherecentPandoraratecourtdecision,inwhichthecourt
foundthatwithdrawingpublishersdidnotsupplycatalogdatathatwouldhaveallowed
Pandoratopulltheirsongsfromitsservice.686Someweretroubledbythistactic,and
urgedthat,ifthistypeofpublisherwithdrawalisallowed,thewithdrawingpublisher
mustberequiredtoprovideimmediatetransparencyastothemusicalworksthatare
nolongersubjecttolicense.687
Onthelicensorsideoftheequation,thelackofreliabledatameansthatroyalty
paymentsmaybedelayed,misdirected,ornevermade.688SoundExchangehighlighted
inparticulartheproblemscausedwhendigitalservicesfailtoincludestandard
identifiersintheirreportsofusageunderthesection112and114statutorylicenses.It
explainedthatbasicdataelementsfeaturedartistname,tracktitle,albumname,and
labelnamesimplyarenotsufficienttodistinguishunambiguouslyamongthetensof
millionsofrecordingsactivelybeingcommercializedtoday.689Instead,standard
identifiersaretheonlypracticablewaytoidentifyandaccuratelyaccountforusageofall
thoserecordings.690
RIAAsimilarlynotedthat[a]flourishingmusicalworklicensingmarketplacerequires
boththatpotentiallicenseescangetlicensedandthatroyaltiesflowproperlytomusic
publishersandsongwriters,andthatreliableandaccessibleinformationiscriticalto
makingthathappen.691NMPAagreed,sayingthatadatabasewhereweknowthe
rightswouldbevaluable.692Flawedormissingdataisnotaproblemuniquetomajor
labelsorfamousartists,andA2IMcommentedthatinaccuratedataisespecially
problematicfortheindependentlabelcommunitybecauseitishardertoidentifylesser
knownartistswithoutaccuratedata.693
686
687
RIAAFirstNoticeCommentsat46;Music Licensing Hearingsat7475(statementofJimGriffin,
OneHouseLLC).
688
689
690
Id.
RIAASecondNoticeCommentsat17;see also Music Licensing Hearingsat75(statementofJim

Griffin,OneHouseLLC)([A]bsenttheuseof[globaluniversalidentifiers]moneydisappears
alongitspathtoitsintendedreceiver.Wheredoesthatmoneygo?Topoolsofunattributed
income,dividedthroughmarketshareformulasattheorganizationsthatcollectthemoney.).
691
692
Tr.38:0508(June4,2014)(BrittanySchaffer,NMPA/Loeb&Loeb).
693
A2IMSecondNoticeCommentsat2.
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b. Parties Views
Inlightoftheconcernsidentifiedabove,thereappearstobewidespreadagreementthat
authoritativeandcomprehensivedatarelatedtotheidentityandownershipofworks
wouldsubstantiallyenhancetransparencyinthemusiclicensingsystem,reduce
transactioncosts,andfacilitatedirectlicensingthroughprivatenegotiationintheopen
market.694Thereis,however,lessharmonyaboutthebestwaytoachievethisgoal.
Somesuggestedthatthegovernmentshouldplayacentralrole.DiMA,forexample,
proposedthattheCopyrightOfficecreateandmaintainamusicdatabase,whileothers
calledfortheOfficetoidentifyandpublicizedatastandards,andfacilitateorrequire
submissionofsuchdataintheregistrationorrecordationprocess.695Othersconceived
ofquasigovernmentalsolutions.FMCstatedthatCongressmightconsidercreatinga
nonprofittooverseethedevelopmentofaglobalregistrydatabase(ordatabases)that
couldbeoverseenbygovernment,incooperationwithinternationalbodies.696Several
licenseessuggestedASCAPandBMIshouldberequiredtoprovidebetterandmore
usablerepertoiredata.697Someproposedmoremarketbasedsolutions,suchasdata
expertJimGriffinsproposaltoemulatetheregistrationsystemforwebsites,whereby
thegovernmentwouldengageinstandardssettingtoencouragethecreationofprofit
seekingprivateregistries,similartodomainnameregistrieslikeGoDaddy.698
Othersgroupsprincipallyrepresentingcopyrightownersbelievedthatgovernment
involvementwasunnecessary.InNMPAsview,ifthemarketforcreativeworkswere
unregulatedandfreeofgovernmentalpricecontrols(includingthesection115license),
transactionalhubs,syndicationplatformsandothersupplychainmanagement
platformswoulddeveloptomatchbuyerstosellersandtoallocateanddistribute
revenues.699Fortheirpart,thePROshighlightedtheironlinerepertoiredatabasesand
effortssuchasMusicMarktoenhanceaccesstoreliablerepertoiredata.700ThePROs
DiMASecondNoticeCommentsat34,7;Tr.at381:0811(June23,2014)(WaleedDiab,
Google/YouTube).
694
DiMASecondNoticeCommentsat5;see SiriusXMFirstNoticeCommentsat67;
SoundExchangeSecondNoticeCommentsat6;A2IMSecondNoticeCommentsat2;see also
CCIASecondNoticeCommentsat3.
695
696
FMCFirstNoticeCommentsat22;see PublicKnowledge&CFAFirstNoticeCommentsat28.
NABSecondNoticeCommentsat2;CTIAFirstNoticeCommentsat7;DiMASecondNotice
Commentsat67.
697
Music Licensing Hearingsat72(statementofJimGriffin,OneHouseLLC).
698
NMPA&HFASecondNoticeCommentsat3.
699
ASCAPSecondNoticeCommentsat1213(citingASCAPssearchabledatabase,named
ASCAPClearanceExpressorACE,athttp://www.ascap.com/ace);BMISecondNotice
Commentsat9(citingBMIsextensivesearchablerepertoiredatabaseathttp//www.bmi.com).
700
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U.S.CopyrightOffice
acknowledgedthattheirplansdonotincludemakingalloftheirdataavailabletothe
public,however,stressingthattheyfacesignificantconfidentialityconcerns.701
RIAAnotedthatassignmentofISRCsandISWCscouldbebettercoordinated(e.g.,by
havingtherecordcompanyfirstrecordinganewsongassigntheISRCandISWCin
tandemtoensurethattheISWCwillbeavailabletorelevantstakeholdersuponasongs
release).702Stakeholdersgenerallysharedtheviewthatsuchsolutionsareworth
exploring.703
BothSoundExchangeandRIAAobservedthattherearefewerproblemswithsound
recordingthanmusicalworkdata.704Accordingtothem,soundrecordingidentification
andownershipinformationisgenerallyavailablefromproductpackaging,orfrom
publiclyavailableinternetsourcessuchasallmusic.comanddiscogs.com.705
Additionally,digitalservicesgenerallyreceivemetadatafromrecordcompaniesand
distributorsprovidingmusicfiles.706RIAApointedoutthat,unlikemusicalworks,
ownershipofsoundrecordingsisrarelydividedamongmultiplecoowners,andrecord
companiesowningcommerciallysignificantrecordingsarelessnumerousthanmusic
publishers,withlessfrequentchangesinownership.707
SoundExchangeadditionallyexplainedthatitmaintainsrobustidentificationand
ownershipinformation,includingISRCsforapproximately14millionsound
recordings.708SoundExchangeisactivelyexploringmeansbywhichitmightprovide
statutorylicenseeswithaccesstoitsdatabaseforstatementofaccountpurposes.For
example,SoundExchangemayoffermusicservicesthecapabilitytosearchforISRCsor
supplymusicserviceswithISRCsthataremissingfromtheirreportsofuse.709
Id.at5;ASCAPSecondNoticeCommentsat78.
701
See, e.g.,RIAASecondNoticeCommentsat3536;Tr.at346:01349:13(June23,2014)(Lynn
Lummel,ASCAP;AndreaFinkelstein,SME;JacquelineCharlesworth&SarangDamle,U.S.
CopyrightOffice)(discussingassignmentofISRCinrelationtoISWC).
702
See, e.g., PipelineProjectSecondNoticeCommentsat9;DiMASecondNoticeCommentsat68;
703
Id.at33;SoundExchangeSecondNoticeCommentsat4.
704
705
SoundExchangeSecondNoticeCommentsat4;RIAASecondNoticeCommentsat33;Tr.at
336:0212(June23,2014)(AndreaFinkelstein,SME;SarangDamle,U.S.CopyrightOffice)
(describingmetadatadeliveredbyrecordcompanies).
706
707
708
Id.at5.
709
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U.S.CopyrightOffice
SoundExchangeandRIAAtogetheremphasizedthatlicenseesoperatingunderthe
section112and114licensesshoulduseavailableidentifyinginformation,particularly
ISRCs,whenreportingusagetoSoundExchange.710Suchanobligationwouldincrease
automaticmatchingofreportedusagetoknownrepertoireandfacilitateaccurate
manualmatchingwhennecessary,thusenhancingthedatamaintainedby
SoundExchange.711Bothpartiesnotedthatadoptionofsucharequirementwould
encouragebroaderuseoftheISRCstandard.712
2. Usage and Payment Transparency

Incompleteorinaccuratedatafrustratestheabilityofcreatorsandsellersofmusicto
trackhowmusicisusedandwhatpaymentsaremade.Evenwhenaccuratedatais
available,however,stakeholdershadconcernsabouttheeffectivenessofmusicusage
andpaymenttrackingforpaymentallocationandaboutthelackofauditrightsfor
certainlicenses.Atbottom,theissueinthemusicindustryisthatparticipantswant
reassurancethattheyarebeingtreatedfairlybyotheractors.713
a. Advances and Equity Deals

Therewasagrowingconcernthatpaymentsreceivedbyrecordcompaniesandmusic
publishersfromnewdigitalmusicservicesaspartofdirectdealsarenotbeingshared
fairlywithsongwritersandrecordingartists.714SAGAFTRAandAFMwarnedthat
whiledirectlicensingdealsbetweendigitalmusicservicesandrecordlabelsor
publishersmayresultinmorecompensationfromlicensees,directdealsmayactually
resultinlowerpaymentstoartiststhanunderthestatutorylicensingscheme.715
710
Id.;RIAASecondNoticeCommentsat35.
711
Id.;RIAASecondNoticeCommentsat35.ThesepartiesnotedthattheCRBiscurrently
consideringupdatestotherelevantnoticeandrecordkeepingregulations.
712
Tr.at86:0103(June4,2014)(BrittanySchaffer,NMPA/Loeb&LoebLLP)(explainingthat
theresalackoftrustbetweentherecordcompaniesandthepublishers);Tr.at77:1517(June
16,2014)(EricD.Bull,CreateLaw)(notingthattheressuchdistrustbecauseoftheamountof
themoneythatisgoingtobeexchanged);Tr.at14:0305(June17,2014)(GarrySchyman,SCL)
([W]ereallydonttrustapublisherwhoisnotinapositiontotelluswhatweareentitledto.).
713
ResnickSecondNoticeCommentsat2(Spotifyaloneisreportedtohavepaidhundredsof
millionsindollarsinupfrontandnonrecoupablepaymentsfortheprivilegeoflicensingmajor
labelcatalogues.).
714
SAGAFTRA&AFMFirstNoticeCommentsat7;SAGAFTRA&AFMSecondNotice
Commentsat2(Whatevertheindividualroyaltyartistsshare,itwillnotbepaiddirectly,itwill
besubjecttorecoupment,anditwillonlybeverifiable(ifatall)throughacomplexandexpensive
individualauditundertheroyaltycontract.).
715
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Amajorobjectiontodirectlicensingisthatlabelsandpublishersdonotnecessarily
shareadvancepaymentsofroyaltiesinparticular,unrecoupedadvancesorbreakage
monieswithcreators.716Advancepaymentsofroyaltiescanbesignificant;Google,for
instance,reportedlypaidmorethan$400milliontoWMGunderarecentthreeyeardeal
tolicensethelabelsmusicforYouTubeanditssubscriptionofferings.717Inmanycases,
ifanadvanceisnotfullyrecouped(i.e.,fullyappliedtoroyaltiesdue)bytheendofthe
licenseterm,theexcessfeesareretainedbythelabelorpublisherratherthanreturned.
Thequestioniswhetherthesefundsareaccountedforandpaidoutbythelabelor
publishertoitsartistsorsongwriters.
Somerecordlabelsandpublishersmayshareunrecoupedadvanceswithperformers
andwriters,butthepracticeisnotuniversal.718Andwhilewellestablishedmusicians
mayoccasionallynegotiatearighttocollectonbreakage,719othersarenotas
successful.720Negotiatingforthesepaymentscanbedifficult,asartistsandsongwriters
arenotnecessarilyawareofdealterms.Forexample,SGAcommentedthatwithoutthe
testimonyofanexecutiverepresentingDMXinaBMIratecourtproceeding,the
songwritingcommunitywouldneverhaveknownofa$2.4millionadvancepaidby
DMXtoSony/ATV.721
Similarlysuspectforcreatorsareequitydealsbetweenmajorlabelsanddigitalservices.
Ithasbeenreported,forinstance,thatthemajorlabelscollectivelyacquiredan18%
ownershipinterestinSpotify.722ReferencingSpotify,aswellasYouTubeand
Musicmaker,PerryResnick,whoconductsmusicaudits,commentedthat[m]anydeals
arenotdoneunlessthemajorlabelsreceiveashareofequityinthelicensee,whichalso
lowerstheroyaltyratespaidforspecificrecordings,sometimesdowntozero.723There
See A2IMSecondNoticeCommentsat56(definingbreakageasexcessrevenuethatcannot
beattributedtospecificrecordingsorperformancesand,therefore,isnotrequiredtobeshared
withartists,songwritersortheactualsoundrecordingcopyrightowner);ResnickSecondNotice
Commentsat2([E]xcesspaymentsarenotsharedwithrecordingartists.).
716
717
Karp,Artists Press for Their Share.
Forexample,MartinBandierofSony/ATVhasstatedthathiscompanydoesnotshareextra
advancemoneybecausethere[isnt]muchtoshare.Karp,Artists Press for Their Share.
718
719
A2IMSecondNoticeCommentsat6;Tr.at143:0811(June23,2014)(RichardBengloff,A2IM).
720
Tr.at109:13110:03(June5,2014)(RobertMeitus,MeitusGelbertRoseLLP).
SGASecondNoticeCommentsat1415(Sony/ATVwasalsopaid$300,000foradministrative
expenses).
721
722
SeeLindvall,Behind the Music: The Real Reason Why the Major Labels Love Spotify.
723
ResnickSecondNoticeCommentsat2.
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U.S.CopyrightOffice
seemstobenoreliablepractice,however,underwhichartistsandsongwritersare
compensatedforsuchequityarrangements.724
b. PRO Distributions
PROscreatevaluebylicensing,administering,andenforcingmusiccreatorspublic
performancerights.Yetsomesongwritersvoicedconcernsthatpartofthisvalueislost
throughinaccuratepaymentallocation.PROsfrequentlyusesamplingsurveysto
estimatehowmanytimesasonghasbeenperformedduringapaymentperiod,andrely
uponthoseestimatestoallocateroyaltiesamongtheirmembers.725
Analternative,andmorecomprehensive,formofmeasurementiscensusreporting,
wherebylicenseesaccountforeachuseofamusicalwork(e.g.,eachindividualstream)
tothecollectingentity.Censusreportingismorecommonfordigitalservices,whereit
iseasiertotrackindividualperformances.726ASCAPreliesuponcensusdataonlywhen
itiseconomicallyfeasibletoprocess.727Formanyusesincludingterrestrialradio
usesandsomedigitalusesASCAPusesasamplesurvey.728BMIsimilarlyreliesupon
extrapolateddatatopayroyaltiesinmanyinstances.729Informationconcerning
ASCAPsandBMIsdistributionpracticesispubliclyavailableontheirwebsites.730
Somemusiciansandpublisherscommentedthatincreaseduseofcensusdatainsteadof
surveyswouldresultinmoreaccuratepaymentsbyPROstotheirmembersunder
blanketlicenses.Forinstance,MusicServicesstatedthatsurveybaseddistribution,
particularlyforradioandliveperformances,isantiquatedandthat[m]any
724
Karp,Artists Press for Their Share.
Accordingtoonesource,[m]ostperformancedataisdrawnfrombroadcastsources,under
theassumptionthatthemusicbeingperformedoverradioandtelevisionisroughlythesameas
themusicbeingperformedincafes,hotels,sportsarenas,...restaurants,andnightclubs.KOHN
at1281.
725
SeeNMPA&HFAFirstNoticeCommentsat9.Forinstance,SoundExchangepaysalmost
entirelyonacensusbasis,anddoesnotgenerallyusesampling.See SoundExchangeSecond
NoticeCommentsat7.
726
ASCAP Payment System: Keeping Track of Performances,ASCAP,http://www.ascap.com/

members/payment/keepingtrack.aspx(lastvisitedJan.30,2014).
727
Payment System: The ASCAP Surveys,ASCAP,
http://www.ascap.com/members/payment/surveys.aspx(lastvisitedJan.30,2014).
728
Royalty Policy Manual,BMI,http://www.bmi.com/creators/royalty_print/detail(lastvisitedJan.

16,2015).
729
ASCAPs Survey and Distribution System: Rules & Policies,ASCAP(June2014),
http://www.ascap.com/~/media/files/pdf/members/payment/drd.pdf;Royalty Policy Manual,BMI,
http://www.bmi.com/creators/royalty_print/detail(lastvisitedJan.16,2015).
730
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U.S.CopyrightOffice
publishersandwritersbelievetheyarenotreceivingtheirfairshareofthePROpot.731
Otherparticipantsobservedthatunderasamplingsystem,musicianswhodonothave
mainstreamsongsontheradioareunderpaid.732Underthisview,sincesamplingis
morelikelytoidentifyhitsongs,thePROwilllikelyundercountperformancesofworks
byemergingorfringemusicians.
Inresponse,arepresentativefromASCAPsympathized,statingideally,yes,Iwish
everyonewouldgetpaidforeveryperformance,butnotedtheadministrative
impracticalityofidentifyingeveryuse.733Othersechoedthissentiment,commenting
thatevenifusescouldbepreciselytracked,somewouldbesosmallthattheywouldnot
bepayable.734Nonetheless,ASCAPnotesthat[a]snewtechnologiesmakesurveyinga
givenmediumsuchasbroadcastradioeconomicallyefficient,weimplementthose
technologiestomoveclosertoafullcensus.735Foritspart,BMIcommentedthatthere
iscompetitionbetweenPROsformembersandthemarketwillsufficientlydrive
distributionmethodologies.736
Despitetheseconcerns,songwritersgenerallyexpressedconfidenceinthePROs.737The
PROsareseenasrelativelytransparent738andprotectingthewritersshareof
performanceroyalties.739SGAnotedthatlicensingthroughthePROs...hasbenefited
andgivenprotectiontothecommunityofAmericanmusiccreatorsforoverone
hundredyearsbyprovid[ing]musiccreatorswiththecrucialassurancethatan
importantsourceofrevenuewillbepaiddirectlytothembythePRO.740Similarly,in
NSAIsestimation,ASCAPandBMIessentiallyactasnotforprofitcollectionarmsfor
songwritersandcomposers.741
c. PassThrough Licensing
Asnotedabove,undersection115,compulsorylicenseescanauthorizethirdparty
streamingservicestotransmitdownloadsandstreamsofmusicalworks.Songwriters
731
Tr.at261:20262:03(June5,2014)(PhilPerkins,MusicServices).
Tr.at22:1425:19(June5,2014)(RoyalWadeKimes,WondermentRecords);seeSimpsonFirst
NoticeCommentsat2.
732
733
Tr.at28:1729:02(June5,2014)(SamMosenkis,ASCAP).
734
ModernWorksMusicPublishingSecondNoticeCommentsat67.
735
ASCAPSecondNoticeCommentsat17.
736
BMISecondNoticeCommentsat15.
737
CouncilofMusicCreatorsFirstNoticeCommentsat23.
738
SCLFirstNoticeCommentsat11.
739
740
SGAFirstNoticeCommentsat7.
741
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U.S.CopyrightOffice
andpublisherscomplainvigorouslyaboutthissystem.742SGApointedoutthatpass
throughlicensingcreatesasituationinwhichthecreatorsandownersofmusical
compositionshavenoprivityofcontractwithonlinemusicdistributiongiantssuchas
AppleiTunes,andmustthereforerelyonsometimesadversarialrecordcompany
intermediariesforthemonitoringandpaymentofroyaltiesearnedviaonline
downloadusage.743Anothercommenterexplainedthatpassthroughlicensing,where
recordlabelscanlicensemechanicalrightsdirectlyonpublishersbehalfandwithout
publishersinput,leavessongwriterswithnoclueastowhetherornottheyareproperly
paid.744
Stakeholdersappearlargelytoagreethatthepassthroughapproachwhichmimicsthe
traditionalphysicalmodel,whererecordlabelsshipproducttostoresandreportsales
backtopublishersisunnecessaryinthedigitalenvironment,sinceitisfeasiblefor
musicownerstohaveadirectrelationshipwithconsumerfacingdistributors.
Significantly,evenRIAA,apresumedbeneficiaryofthesection115passthrough
license,appearstofavortheendofthispassthroughlicensing:Themajorrecord
companiesgenerallysupportinprincipletheeliminationofpassthroughlicensing...
withinthecontextofastructurethatmakesitunnecessary.745
ASCAPandBMIalsoexpressdispleasurewiththeanalogousthroughtotheaudience
licensesrequiredundertheASCAPandBMIconsentdecrees,whereapartythatprocuresa
licensefromthePROisabletoauthorizetransmissionsbyadditionaldistributors.See ASCAP
ConsentDecree V;BMIConsentDecree IX.Originallyconceivedtoallownetworkstoobtain
licensesthatextendtodownstreambroadcastsbyaffiliates,theconcepthasbeenextendedto
onlineservicessuchasYouTubethatallowtheirvideocontenttobesharedandembeddedon
thirdpartywebsitesthatmaybegeneratingrevenuethroughadvertisementsorotherwise.
ASCAPFirstNoticeCommentsat19.PerASCAP,athroughtotheaudiencelicenserequestcan
giveunfetteredpermissiontoahugenumberofuserswithoutthebenefitoffullremunerationto
musiccreators. Id.at20.
742
SGAFirstNoticeCommentsat67.Inrecentlypromulgatedregulations,theCopyrightOffice
addedanewrequirementforsection115licenseesthatrequiresthemtobreakdownroyalty
statementstoindicateusagebythirdpartyservices,socopyrightownerscanatleastseewhatis
beingreportedtothesection115licensee.37C.F.R.210.16210.17.
743
LaPoltSecondNoticeCommentsat11;see also NMPA&HFAFirstNoticeCommentsat12(To

theextentcompulsorylicenseespassthroughmechanicalrightstoathirdpartydigitalmusic
distributoranddonotreportwhothethirdpartydistributoris,songwritersandmusic
publishersdonotevenknowhowtheircompositionsarebeingusedandcannotevaluatethe
accuracyofthecompulsorylicenseesreporting.);KohnFirstNoticeCommentsat9(Pass
throughlicenses,atleastinsofarastheyapplytodigitaltransmission,shouldbeeliminated.).
744
745
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U.S.CopyrightOffice
IV.
Analysis and Recommendations
Itmaybetheverypowerofmusicthathasledtoitsdisparatetreatmentunderthelaw.
Thesongsweenjoyinourearlyyearsresonatefortherestofourlives.Humanbeings
haveadeeppsychologicalattachmenttomusicthatoftenseemstoapproachasenseof
ownership;peoplewanttopossessandsharethesongstheylove.Perhapsthispassion
isoneofthereasonsmusichasbeensubjecttospecialstatutorytreatmentunderthelaw.
Regardlessofwhathasanimatedourcenturyoldembraceofgovernmentregulationof
music,theCopyrightOfficebelievesthatthetimeisripetoquestiontheexisting
paradigmandconsidermeaningfulchange.Inrecentyears,wehaveseenpiecemeal
effortstoaddressparticularissuesthroughfocusedlegislation:therehavebeenbills
directedtothelackofaterrestrialperformancerightforsoundrecordings,ratesetting
inequities,andpaymentforpre1972soundrecordings.Eachhastargetedaspecific
issueorissueswithintheexistingsystem.Inthecurrentenvironment,however,these
sortsoflimitedproposalsstandingaloneseemunlikelytogeneratebroadenough
supporttobecomelaw.Itisforthisreason,perhaps,thatsomemembersofCongress
haverecentlyindicatedinterestinamoreholisticapproach.746
Howambitiousshouldanysuchapproachbe?Asanumberofcommentersremarked
duringthecourseofthisstudy,ifweweretodoitallagain,wewouldneverdesignthe
systemthatwehavetoday.Butastemptingasitmaybetodaydreamaboutanew
modelbuiltfromscratch,suchacoursewouldseemtobelogisticallyandpolitically
unrealistic.Wemusttaketheworldaswefindit,andseektoshapesomethingnew
fromthematerialwehaveonhand.
Inthissection,basedontheinformationandcommentarygatheredinthestudy,the
Officeanalyzescriticalareasofconcernandconsideringtherecordandmeritsof
disparateviewpointssuggestswaystoreshapeourmusiclicensingsystemtobetter
meetthedemandsofthedigitalera.Followingadiscussionoftheroleofgovernmentin
themusicmarketplace,theOfficeoutlinesaseriesofinterrelatedchangesthatmightbe
implementedtomodernizeourstrugglingsystem.Therecommendationsbelowseekto
capitalizeonthevaluethatexistinginstitutionsandmethodscouldcontinuetoprovide
underanupdatedframework.
Ratherthanpresentingadetailedplan,theOfficesrecommendationsshouldbe
understoodashighlevelandpreliminaryinnaturemoreofasketchthanacompleted
picture.Itisalsoimportantthattheproposalsbecontemplatedtogether,ratherthanin
See, e.g.,DarylP.Friedman,MusicBus Gaining Speed as Members of Congress Climb On,

GRAMMYNEWS(June18,2014),http://www.grammy.com/blogs/musicbusgainingspeedas
membersofcongressclimbon(notingsupportforomnibuslegislationbyRep.JerroldNadler,
Rep.KevinMcCarthyandRep.NancyPelosi]).
746
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U.S.CopyrightOffice
isolation.TheOfficeseekstopresentaseriesofbalancedtradeoffsamongtheinterested
partiestocreateafairer,moreefficient,andrationalsystemforall.
A. Guiding Principles
TheCopyrightOfficeappreciatesandagreeswiththefourgroundingprinciplesthat
werearticulatedbymanyduringthecourseofthisstudy,asdiscussedabove.Theseare:
Musiccreatorsshouldbefairlycompensatedfortheircontributions
Thelicensingprocessshouldbemoreefficient
Marketparticipantsshouldhaveaccesstoauthoritativedatatoidentifyand
licensesoundrecordingsandmusicalworks
Usageandpaymentinformationshouldbetransparentandaccessibleto
rightsowners
Asmuchastheremaybeconsensusonthesepoints,however,theoppositecouldbesaid
ofstakeholdersviewsastohowbesttoachievethem.Havingconsideredtheplethora
ofissuesthatplagueourcurrentlicensingsystemandhowtheymightpracticallybe
addressedtheOfficehasidentifiedsomeadditionalprinciplesthatitbelievesshould
alsoguideanyprocessofreform.Theseare:
Governmentlicensingprocessesshouldaspiretotreatlikeusesofmusicalike
Governmentsupervisionshouldenablevoluntarytransactionswhilestill
supportingcollectivesolutions
Ratesettingandenforcementofantitrustlawsshouldbeseparatelymanagedand
addressed
Asingle,marketorientedratesettingstandardshouldapplytoallmusicuses
understatutorylicenses
EachoftheseprinciplesisexploredbelowinthecontextoftheOfficesoverall
recommendations.
B. Licensing Parity and Fair Compensation

Questionsoflicensingparityandfaircompensationarecloselytiedtotherelative
treatmentofmusicrightsandrightsholdersunderthelaw.747TheOfficebelievesthat
Duringthecourseofthestudy,theOfficeandothersemployedthetermplatformparityin
referencingtheconcernthatexistinglicensingpolicieshaveadisparateimpactondifferent
distributionplatforms.TheOfficenowadoptsthebroadertermlicensingparityinrecognition
747
134
U.S.CopyrightOffice
anyoverhaulofourmusiclicensingsystemshouldstrivetoachievegreaterconsistency
inthewayitregulates(ordoesnotregulate)analogousplatformsanduses.Inaddition
torewardingthosedistributionmodelsthataremostresourceefficientandappealingto
consumers,evenhandedtreatmentwillencouragemoreequitablecompensationfor
creators.
Fromtodaysvantagepoint,atleast,theimpactofourcurrentsystemondifferent
classesofcopyrightownersandusersfavoringsomewhiledisadvantagingothers
seemstobemoretheproductofhistoricalhappenstancethanconsciousdesign.Tothe
extentourpoliciesrequirecopyrightownerstosubsidizecertainbusinessmodels
throughreducedroyalties,ascopyrightownersclaim,thisisnottheresultofapresent
dayjudgmentthatitisafairwaytotreatcreators,orpromotesthevaluesofour
copyrightsystem.Thesamecanbesaidofpoliciesthatimposehigherroyalty
obligationsononebusinessmodelovercompetingplatforms.
Thepolicyrationalesthatanimatedthecreationofthesection115compulsorylicense,
thePROconsentdecrees,andeventhesection112and114frameworkfordigital
performances,arenowdecadesbehindus.TheOfficebelievesthatthecurrent
widespreadperceptionthatthesystemisoutmodedandbrokenmayprovidean
opportunitytoreviewandrationalizetheplayingfield.
1. Equitable Treatment of Rights and Uses

Assuggestedabove,theCopyrightOfficebelievesthatanimportantelementofarobust
andfairmusicmarketplaceistotreatequivalentusesofsoundrecordingsandmusical
worksandcompetingplatformsalike,orasalikeascanpracticallybeachieved.
a. Musical Works Versus Sound Recordings

Whichismoreimportant,thesongorthesoundrecording?Itallbeginswithasong,
runstheoftcitedrefrain;748butthenagain,thesongisbroughttolifethroughasound
recording.Whilethereis,ofcourse,nodefinitiveanswertothisquestion,asreflected
throughoutthisreport,thelawnonethelesstreatssoundrecordingsandmusicalworks
differently.
Inthecaseofnoninteractivestreaminguses,soundrecordingsaresubjecttocompulsory
licensingatgovernmentsetrates.Butapartfromthis,soundrecordingsarelicensedby
theirownersinthefreemarket.
ofthefactthatthecurrentlicensingframeworkalsodisparatelyimpactsdifferentclassesof
copyrightownersandcreators.
748
NSAI,http://www.nashvillesongwriters.com(lastvisitedJan.18,2014).
135
U.S.CopyrightOffice
Asformusicalworks,whilesynchuses(includingconsumergeneratedvideos)arenot
subjecttogovernmentoversight,749theothercoresegmentsofthemarket(mechanical
reproductionandperformanceuses)areregulated.Asindicatedabove,arecurring
complaintfrompublishersandsongwritersisthatsignificantlyhigherratesarepaidfor
soundrecordingsthanformusicalworksintheonlineworldwhetherthoseratesare
setbytheCRBorbyoneoftheratecourts.Atleastsomeofthisdisparityappearsto
arisefrompublishersinabilitytonegotiatefreefromgovernmentconstraintwhere
recordcompaniescan.
Inkeepingwiththeguidingphilosophythatgovernmentshouldaspiretotreatlikeuses
ofmusicalike,theOfficebelievesthisshouldchange,atleastinthedigitalrealm.That
is,wheresoundrecordingownershavetheabilitytonegotiatedigitalratesintheopen
market,soshouldownersofmusicalworks.
Althoughthepathtoenablingthistypeofparityiscomplicatedbythedivergent
licensingframeworksformechanicalandperformancerightsonthemusicalworkside,
theOfficesapproachwouldofferafreemarketalternativetomusicalworkowners,in
theformofanoptoutright,inthemostsignificantareaswheresoundrecordingowners
enjoyunfettereddigitalrightsnamely,interactivestreamingusesanddownloads.
Andwheresoundrecordingownersaresubjecttostatutoryratesettingi.e.,inthecase
ofnoninteractivestreamingmusicalworkswouldremainregulated.Tofurther
promoteuniformityofapproach,asdiscussedbelow,theOfficeisrecommendingthat
allmusicratesettingactivitieswhetheronthesoundrecordingormusicalworkside
takeplacebeforetheCRB.
TheOfficebelievesthattreatinganalogoususesalikeinthedigitalenvironmentismore
likelytoyieldequitableratesasbetweensoundrecordingsandmusicalworksorwill
atleastmakethatgoalmoreattainable.750ThisdoesnotmeanthattheOfficeassumes
WhilesynchusesbyconsumervideositessuchasYouTubearenotsubjecttocompulsory
licensing,thedegreeofcopyrightownercontrolwithrespecttositesfeaturinguserposted
contentiscomplicatedbythesafeharborprovisionsofsection512,whichlimitsuchsites
liabilityforhostingthecontent.
749
WhilethesameargumentcanofcoursebemadewithrespecttophysicalformatssuchasCDs
andvinylrecordswherelabelsalsohavethefreedomtonegotiateandpublishersdonotin
pursuingissuesoffaircompensation,stakeholdersappearoverwhelminglytobeconcernedwith
digital,ratherthanphysical,uses.Likelythisisbecausetheyarelookingtothefuture,andthe
futureisdigital.Inaddition,eventhoughsection115appliestobothdigitalandphysicaluses,
thelicensingsituationforphysicalgoodsissomewhatdistinguishable.Mostphysicalgoodsare
inalbumformat,andthusgeneratesignificantlyhighermechanicalrevenuesbyvirtueoftheir
inclusionofmultiplesongs.Additionally,becausethefirstuseofamusicalworkisnotsubjectto
compulsorylicensing,publishershavetherighttodemandahigherthanstatutoryratewhen
licensingtheoriginalrecordingatleastintheory;forreasonsthatarenotentirelyclear,it
appearsthatpublishersalmostneverexercisethisoption.See RIAAFirstNoticeCommentsat16
750
136
U.S.CopyrightOffice
thattheratesforsoundrecordingsandmusicalworksnecessarilyshouldbeequal.
Rather,thegoalistoencourageevenhandedconsiderationofbothratesbyasingle
body,underacommonstandard,toachieveafairresult.
Thebenefitsofparalleltreatmentwouldnotbelimitedtolicensingatgovernmentset
rates.Whereamusicpublisherhadchosentooptoutofthestatutorylicenseto
negotiateadirectdeal,boththepublisherandthesoundrecordingownerwouldhave
thesameabilitytomaketheircasetothelicensee.Thelicenseewouldthenbeina
positiontoassessthevalueofeachrightandproceedaccordingly,ashappensinthe
synchmarkettoday.
Finally,suchanapproachwouldalsoallowforthepossibilityofachievinganallin
rateandsimplifiedratestructurecoveringbothsoundrecordingsandmusicalworks
fornoninteractiveusesunderthesection112and114licenses(includingterrestrial
radio,whichtheOfficeproposesbebroughtunderthoselicenses,asdiscussedbelow).751
Assuggestedbytherecordlabels,itmightbepossibleforlabelsandpublisherstoagree
toaroyaltysplitasbetweenthemorhavethesplitsetinaninitialphaseofaCRB
proceedingandthenproceedtogetherasalliesinlitigatingtheratestobepaidby
statutorylicensees.752
n.31(statingthatthesystemshouldrecognizetherealitythatsongwritersandpublishershave
alwayschosentolicensefirstusesatthesameroyaltyratesasotherrecordingsandallowthatto
happenbymeansofthesamebusinessprocesses.);see also Tr.at251:07252:04(June4,2014)
(BrittanySchaffer,NMPA/Loeb&LoebLLP)(explainingthatstandardrecordagreement
provisions,suchascontrolledcompositionclauses,oftenpreventpublishersandsongwriters
fromnegotiatingfirstuserateshigherthanthecompulsoryrate).Unlikeinthedigitalrealm,
oncetheoriginalrecordingisreleasedbytherecordcompany,itisnotnearlyascommonfor
thirdpartiestoseekamechanicallicensetoreproduceanddistributethatsamerecordingina
physicalformat.ForthesereasonsaswellasthescantrecordbeforetheOfficeconcerning
physicalproducttheOfficebelievesthatthequestionofwhethertheproposedoptoutright
shouldextendtophysicalusesisperhapsbestleftforfutureconsideration.
BothdigitalmusicservicesandrecordcompanieshaveurgedtheOfficetoconsidersuchan
approach.DiMAFirstNoticeCommentsat25(notingthat[i]nanidealworld,servicesthat
requireacombinationofmusicalworkpublicperformancerights,aswellasreproductionand
distributionrightsunderSection115,wouldbeabletoacquiresuchrightsfromasinglelicensing
sourceunderasinglestatutorylicenseandpayasingleroyaltytoacommonagent);Spotify
FirstNoticeCommentsat10(statingthat[a]licensingregimeinwhichpublicperformance
rightsandmechanicalreproductionrightscouldbeobtainedfromasinglesourceorpursuantto
asinglelicenseisaninterestingideaandcouldintheoryleadtoefficiencies.);RIAAFirstNotice
Commentsat1617(supportingsingleblanketlicensecoveringallrightsinasong).
751
Ifsuchanapproachwereadopted,somethoughtwouldneedtobegivenastowhetherand
howaseparatesettlementwouldbeaccommodatedonthepartofthesoundrecordingownersor
musicalworkownersoncetheratesettingaspectoftheproceedingwasunderway.
752
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U.S.CopyrightOffice
b. Terrestrial Radio
Inthecaseofterrestrialradio,federallawexemptswhatiscurrentlya17billiondollar
industry753frompayingthosewhocontributethesoundrecordingsthatareresponsible
foritssuccess.754Apartfrombeinginequitabletorightsholdersincludingbycurtailing
thereciprocalflowofsuchroyaltiesintotheUnitedStatestheexemptionofterrestrial
radiofromroyaltyobligationsharmscompetingsatelliteandinternetradioproviders
whomustpayfortheuseofsoundrecordings.Inaworldthatismoreandmoreabout
performanceandlessaboutrecordsales,theinabilitytoobtainareturnfromterrestrial
radioincreasesthepressureonpayingsources.Themarketdistortingimpactofthe
terrestrialradioexemptionprobablycannotbeoverstated.
TheOfficehaslongsupportedthecreationofafullsoundrecordingperformanceright,
advocatingforCongresstoexpandtheexistingrightsoitiscommensuratewiththe
performancerightaffordedtootherclassesofworksunderfederalcopyrightlaw.755As
oneofthefewremainingindustrializedcountriesthatdoesnotrecognizeaterrestrial
radioperformanceright,theUnitedStatesstandsinstarkcontrasttopeernations.756In
herrecenttestimonybeforeCongress,theRegisterofCopyrightsdescribedthe
AccordingtofiguresfromtheRadioAdvertisingBureau,radiorevenueshaveincreasedeach
yearsince2009,whenrevenueswere$16,029,000,000,to2013,whenrevenuestotaled
$17,649,000,000anincreaseofnearly10%.RAB Revenue Releases,RADIOADVERTISINGBUREAU,
http://www.rab.com/public/pr/revpr.cfm?search=2013&section=press(clickonAnnualRadio
RevenueTrends)(lastvisitedJan.22,2015).
753
AlthoughtheCopyrightActexemptsterrestrialperformancesofsoundrecordings,following
recentjudicialdecisionsinCaliforniaandNewYorkwhichinterpretedthosestateslawsas
supportingarightofpublicperformancetosoundrecordingownersitisnotclearthatover
theairbroadcastersenjoyacompleteexemptionunderstatelaw.See Flo & Eddie v. Sirius XM CA,
2014U.S.Dist.LEXIS139053;Capitol Records, LLC v. Sirius XM Radio Inc.,No.BC520981(order
regardingjuryinstruction);Flo & Eddie v. Sirius XM NY,2014U.S.Dist.LEXIS166492.Although
thosecaseswerebroughtagainstdigitalproviders,thecourtsreasoningdoesnotappeartobe
limitedtodigitalperformancerights.
754
See,e.g.,Performance Rights Act Hearing(statementofMarybethPeters,RegisterofCopyrights);

Ensuring Artists Fair Compensation Hearing(statementofMarybethPeters,RegisterofCopyrights);
Internet Streaming of Radio Hearingat822(statementofDavidO.Carson,GeneralCounsel,U.S.
CopyrightOffice);PERFORMANCERIGHTSREPORT.
755
SeePublic Performance Right for Sound Recordings,FUTUREOFMUSICCOALITION(Nov.5,2013)

https://www.futureofmusic.org/article/factsheet/publicperformancerightsoundrecordings;
A2IMFirstNoticeCommentsat8;ModernWorksMusicPublishingFirstNoticeCommentsat7;
SoundExchangeFirstNoticeCommentsat1617.Supportersofamorecompleteterrestrial
soundrecordingperformancerightpointoutthattheU.S.positiononthisisincontrastto
nearlyeverydevelopednationontheplanet[with]notableexceptionsinclud[ing]IranandNorth
Korea.FMCFirstNoticeCommentsat14; see also The Registers Call for Updates Hearingat3
(statementofRep.MelvinL.Watt).
756
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U.S.CopyrightOffice
terrestrialperformancerightissueasripeforresolution,757recommendingthatany
congressionaleffortstoupdatetheCopyrightActincludealegislativeanswer.758
Radiobroadcastersarguethatasoundrecordingperformanceroyaltywouldunfairly
imposeatarifftosubsidizetherecordingindustryattheexpenseofbroadcasters
theiropinion,thelimitedperformancerightandlackofroyaltiesinterrestrialradiohave
notimpactedthegrowthorsupremacyoftheUnitedStatesrecordingindustry.759
Thisargumentwouldseemtoringhollow,however,giventhecurrentchallengesfaced
bythatindustry.
Radiobroadcastersalsopointtothepromotionaleffectoftraditionalairplayonsalesof
soundrecordingsasareasonformaintainingthestatusquo.Undoubtedly,sound
recordingownersrecognizevalueinradioairplay,inparticularfornewreleases.760But
anysuchvaluemustbeconsideredandweighedinthecontextoftheoverallearningsof
thebroadcastindustry.Significantly,asconsumerpreferencesshiftawayfrommusic
ownership,thepotentialforsalesisbecominglessrelevant,andthepromotionalvalue
ofradiolessapparent.
Inthisregard,thecreationofaterrestrialsoundrecordingperformancerightneednot
overlookornegatethequestionofpromotionalvalue,becausethisfactorcanbetaken
intoaccountbyaratesettingauthority,orinprivatenegotiations,toarriveatan
appropriateroyaltyrate.Suchanapproachwouldappeartobearationalsolution
becauseitseemsfairtoassumethatawillingbuyerandwillingsellerwoulddothe
same.761
The Registers Call for Updates Hearingat7(statementofMariaA.Pallante,Registerof
CopyrightsandDirector,U.S.CopyrightOffice);MariaA.Pallante,The Next Great Copyright Act,
36COLUM. J.L.&ARTS315,32021(2013).
757
The Registers Call for Updates Hearingat63(statementofMariaA.Pallante,Registerof
CopyrightsandDirector,U.S.CopyrightOffice).
758
759
Althoughthepracticeofpayolawherebyrecordcompaniespayradiostationstoplay
certainrecordingshasbeenbanned,labelsstilldevoteresourcestoencouragingbroadcastersto
performtheirsongs.SeeGAOREPORTat50(explainingthatalthoughpayolahasbeenformally
outlawedunlessthestationannouncesanyarrangementstoplaysongsinexchangefor
consideration,itiscommonindustrypracticeforrecordcompaniestoemployindependent
promoters).
760
Interestingly,despitethelackoflegalrecognitionforsucharight,therehasbeenforward
movementonthisissueintheprivatemarketplace.MediaconglomerateiHeartMedia(formerly
ClearChannel)whichoffersbothterrestrialandstreamedradiohasenteredintovoluntary
licenseagreementswithWMGandanumberofsmallerrecordlabelsthatcoverbothdigitaland
terrestrialperformancerights(withthedigitalratesapparentlymorefavorabletoiHeartMedia
thanthoseestablishedbytheCRB).SeeChristman,Heres Why Warner Musics Deal with Clear
761
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U.S.CopyrightOffice
c. Pre1972 Sound Recordings

Anotherareawherethelawdivergesinthewayittreatssoundrecordingsandmusical
worksisthelackoffederalprotectionforpre1972soundrecordings,manyofwhich
remaincommerciallyvaluable.This,too,impedesafairmarketplace.Satelliteand
internetradioservicesappeartorelyheavilyonpre1972recordingsincuratingtheir
playlists,presumablybecause(atleastuntilrecentcourtrulings)theseselectionshave
beenviewedasfreefromcopyrightliabilityonthesoundrecordingside.762Atthesame
time,theownersofthemusicalworksembodiedinthesesoundrecordingsarepaidfor
thesameuses.
TheOfficeisoftheviewthatpre1972recordingsshouldbebroughtunderthe
protectionoffederalcopyrightlaw.Suchachangewouldservetheinterestsoflicensing
paritybyeliminatinganothermarketdistortion.Inaddition,itwouldallowforafederal
compensationmechanismfortheartistsresponsibleforpre1972works.
In2009,CongressinstructedtheOfficetoconductastudyonthedesirabilityand
meansofextendingfederalcopyrightprotectiontopre1972soundrecordings.763After
consideringinputfromstakeholders,theOfficeconcludedthatpre1972sound
recordingsshouldbebroughtunderfederalcopyrightlawwiththesamerights,
exceptions,andlimitationsassoundrecordingscreatedonorafterFebruary15,1972.764
IntheOfficesview,fullfederalizationofpre1972soundrecordings(withspecial
provisionstoaddressownershipissues,termsofprotection,andregistration)would
improvethecertaintyandconsistencyofcopyrightlaw,encouragemorepreservation
Channel Could be Groundbreaking for the Future of the U.S. Music Biz (Analysis);Sisario,Clear
ChannelWarner Music Deal Rewrites the Rules on Royalties.Reportedly,iHeartMediawas
motivatedtodothisbyitdesiretohaveamorepredictablecoststructuretogrowthedigitalside
ofitsbusiness.Id. Suchastepmaypointtothepotentialforbroaderindustrycompromiseon
thisissue.
Tr.at183:0718(June24,2014)(JimMahoney,A2IM)(OneonlyneedtoturnonSiriusXM
andseethemanystationsthatprogrammedfullywithpre1972copyrightsongs,recordingsand
concludethattheystillhavevaluetolisteners.Theystillwanttohearthosesongsalot.To
programmerswhoprogrammultiplestationstheresa40sstation,a50sstation,a60sstation.
Theresclassicrock,allthepre1972soundrecordings.So,thepublicstillvaluesthem,
corporationsstillvaluethem.Theyshouldstillmaintainavaluefortherecordingartists.).
762
Specifically,CongressdirectedtheOfficetodiscuss:(1)theeffectthatfederalprotection
wouldhavewithrespecttothepreservationofpre1972soundrecordings;(2)theeffectthat
federalprotectionwouldhavewithrespecttoprovidingpublicaccesstotherecordings;and(3)
theimpactthatfederalprotectionwouldhaveontheeconomicinterestsofrightholdersofthe
recordingsandtoprovideappropriaterecommendations.PRE1972SOUNDRECORDINGSREPORT
atvii.
763
764
Id.atviii.
140
U.S.CopyrightOffice
andaccessactivities,andprovidetheownersofpre1972soundrecordingswiththe
benefitsofanyfutureamendmentstotheCopyrightAct.765
TheOfficehasnotchangeditsmind.Indeed,sincetheOfficeissuedits2011report,
therehavebeensignificantdevelopmentsunderbothCaliforniaandNewYorkstatelaw
whichunderscoretheneedforaunifiedfederalapproachtosoundrecordings.Asa
resultoflawsuitsbroughtbypre1972soundrecordingownersagainstSiriusXMand
Pandora,therehavebeentrialcourtdecisionsinCaliforniaandNewYorkupholding
claimsthatperformancesoftheplaintiffssoundrecordingsinthosejurisdictionsare
protectedunderapplicablestatelaw.766Subjecttoanyfurtherjudicialdevelopments,
thismeansthatthedefendantservicesneedtoobtainlicensesfromsoundrecording
ownerstoperformtherecordings.Butbecausetherequirementtodosoisbasedon
state,ratherthanfederallaw,usersmaynotrelyuponthesection112and114licenses
forthispurpose.
Thelegalquestionofstateprotectionofpre1972soundrecordingperformancerights
willundoubtedlycontinuetopercolateinotherstatesaswell.767Inaddition,thereisthe
significantrelatedquestionofwhetherandhowthepre1972rulingsmaybeappliedto
performancesbyterrestrialbroadcasters,whichofcoursecurrentlyenjoyanexemption
underfederallaw.Thisaspectofthestoryhasyettounfold.
InthelastCongress,SoundExchange,joinedbyothers,pursuedlegislationknownasthe
RESPECTActthatwouldexpandthejurisdictionofthatorganizationtocollectroyalties
forpre1972performancesandprovideasafeharborfromstateliabilityforpaying
services.768Butthisproposedamendmenttofederallawwouldnotofferthefull
panoplyoffederalcopyrightprotectiontopre1972rightsowners,norwoulditallowfor
applicationoftheDMCAharborsorrightsbalancingexceptionssuchasfairuse.In
addition,thereareimportantpolicyconsiderationsrelatingtothepreservationofolder
worksandaccesstooutofprintrecordingsstillsubjecttostateprotectionthatthe
RESPECTActdoesnotaddress.Forthesereasons,whiletheCopyrightOffice
recognizesthepotentialvalueofenactingarelativelyexpedientfixtomakesureolder
artistsgetpaidandtoeliminateliabilityconcernsofdigitalservicesseekingtoexploit
Id.atixx.
765
See Flo & Eddie v. Sirius XM CA,2014U.S.Dist.LEXIS139053;Capitol Records, LLC v. Sirius XM

Radio Inc.,No.BC520981(orderregardingjuryinstructions);Flo & Eddie v. Sirius XM NY,2014
U.S.Dist.LEXIS166492,reconsideration denied,2014U.S.Dist.LEXIS174907.
766
PaulResnikoff,What the pre1972 Decision Really Means for the Future of Radio . . . .,DIGITAL
MUSICNEWS(Oct.13,2014),http://www.digitalmusicnews.com/permalink/2014/10/13/pre1972
decisionreallymeansfutureradio2(notingpendinglitigationbyFlo&Eddie(ofthebandThe
Turtles)againstSiriusXMinFlorida,inadditiontosuitsinCaliforniaandNewYork).
767
RESPECTAct,H.R.47722.
768
141
U.S.CopyrightOffice
pre1972recordings,itcontinuestobelievethatfullfederalizationremainsthebest
alternative.
2. Consistent Ratesetting Standards

Wherethegovernmenthassteppedintoestablishratesfortheuseofmusic,ithas
likewiseactedinaninconsistentfashion.Whileinsomecasesthelawprovidesthatthe
ratesettingauthorityshouldattempttoemulatethefreemarket,inothercasesitimposes
amorepolicyorientedapproach.769
Inthisregard,theratesettingstandardsunderthesection112and114licenseshavebeen
apersistentsourceofunhappinessforbothmusicownersandusers.Thisishardly
surprising,astheselicensesprescribedifferentratestandardsforcompetingplatforms
internetradioversussatelliteradiothusallowingbothsidestocomplain.
Satelliteradioandpreexistingsubscriptionservices(suchasthoseprovidedthrough
cabletelevision)areabletobenefitfromthefourfactorsection801(b)(1)test,which
allowstheCRBtoponderbroaderconcernsthanwhatnegotiatingpartiesmight
considerinthemarketplaceforexample,whetheracontemplatedratewillresultin
disruptiveimpactonthestructureoftheindustriesinvolvedandongenerally
prevailingindustrypractices.770Manyinterpretthesection801(b)(1)languageas
enablingtheratesettingbodytoprotectthevestedinterestsoflicenseesbyestablishing
rateslowerthanwhatwould(atleasttheoretically)prevailinthefreemarket.
Ratesforthereproductionanddistributionofmusicalworksindigitalandphysical
formatsarealsosetunderthemorepolicyoriented801(b)(1)standard.Thisisa
significantpointofcontentionformusicpublishersandsongwriters,whohavebeen
lobbyingforlegislationtosubstitutethewillingbuyer/willingsellerstandard.771
Bycontrast,ratespaidbyinternetradioservicesaresetbytheCRBaccordingtoa
willingbuyer/willingsellerratestandard.Mostperceivethewillingbuyer/willing
sellerstandardtobemoremarketorientedinitsapproach.772Butinternetradio
providershavetwicetakentheircasetoCongresstooverridetheratessetbytheCRB
See ExistingRatesettingFrameworkchart,AppendixD.,foradepictionofthecurrent
ratesettingstandardsandbodies.
769
770
17U.S.C.801(b)(1)(D).
771
See SEA, H.R.4079.
SeeEMFFirstNoticeCommentsat6,8n.14(notingnegotiatedagreementsarerarefor
webcasters,butnoncommercialratesweresuccessfullynegotiatedbeforeafinaldecisionin
DigitalPerformanceRightinSoundRecordingsandEphemeralRecordings,76Fed.Reg.13,026
(Mar.9,2011)).
772
142
U.S.CopyrightOffice
underthatrubric,773andCongresshasgiventhemtheopportunitytonegotiate
substituteagreementswithSoundExchange.774
Asforpublicperformancerightsinmusicalworks,byvirtueoftheconsentdecrees,
ASCAPandBMIaresubjecttoareasonablefeeapproach,whichseekstoapproximate
hypotheticalfairmarketvalue.775Thoughthetermreasonablefeeisnotdefinedin
eitherconsentdecree,eachplacestheburdenofproofonthePROtoestablishthatits
proposedratesarereasonable.776ThePROsattempttomeetthisburdenbyoffering
negotiatedratesasbenchmarks,whicheconomicevidencemayormaynotbeaccepted
bythecourtafterconsideringitsrelevanceoftenthroughthelensofquasiantitrust
analysis.777
Whiletherearethosewhomightarguethattheparticularwordingofadiscretionary
ratestandardwillnothavemuchimpactonaresultsorientedtribunal,thereisatleast
someevidencetothecontrary.Forexample,in2008,inestablishingratesforsatellite
radioservices,theCRBfounditappropriatetoadoptarate...thatislowerthanthe
upperboundarymoststronglyindicatedbymarketplacedata,statingthattheydidso
inordertosatisfy801(b)policyconsiderationsrelatedtotheminimizationofdisruption
thatarenotadequatelyaddressedbythebenchmarkmarketdataalone.778Inany
event,thereappearstobeasharedperceptionamongmanyindustryparticipantsboth
thosethatchafeatthesection801(b)(1)standardandthosethatlikeitthatthestandard
yieldslowerrates.779
SmallWebcasterSettlementActof2002,Pub.L.No.107321,116Stat.2780(2002)(codifiedas
amendedat17U.S.C.114(f)(2010));WebcasterSettlementActof2008,Pub.L.No.110435,122
Stat.4974(2008)(codifiedasamendedat17U.S.C.114(f)(2010)).
773
17U.S.C.114(f)(3)(B).
774
Pandora Ratesetting,6F.Supp.3dat35354; see also BMI v. DMX, Inc.,726F.Supp.2d355,356

(S.D.N.Y.2010)(citingwellestablishedreasonablefeeapproachtodeterminefairmarket
value).
775
BMI v. DMX,683F.3dat45n.14(notinginboththeASCAPandBMIconsentdecree,the
burdenofproofisonthePROtoestablishthereasonablenessofthefeeitseeks).
776
United States v. BMI,316F.3d189,194(2dCir.2003)(Thisdetermination[ofwhetherarateis
reasonable]isoftenfacilitatedbytheuseofabenchmarkthatis,reasoningbyanalogytoan
agreementreachedafterarmslengthnegotiationbetweensimilarlysituatedparties.);see
ASCAP v. MobiTV,681F.3dat82(In[settingarate],theratesettingcourtmusttakeinto
accountthefactthatASCAP,asamonopolist,exercisesmarketdistortingpowerinnegotiations
fortheuseofitsmusic.).
777
DeterminationofRatesandTermsforPreexistingSubscriptionServicesandSatelliteDigital
AudioRadioServices,73Fed.Reg.4080,4097(Jan.24,2008).
778
See, e.g.,DiMAFirstNoticeCommentsat3334(notingrelativelyhigherratesunderthewilling
buyer/willingsellerstandard);NMPA&HFAFirstNoticeCommentsat27(Pandora...paid
779
143
U.S.CopyrightOffice
TheOfficebelievesthatallgovernmentratesettingprocessesshouldbeconductedunder
asinglestandard,especiallysincetheoriginaljustificationsfordifferentialtreatmentof
particularusesandbusinessmodelsappeartohavefallenaway.Thereisnolongera
threatenedpianorollmonopoly,andsatelliteradioisamaturebusiness.Further,
howeverthatratestandardisformulatedi.e.,whetheritisarticulatedaswilling
buyer/willingsellerorfairmarketvalueitshouldbedesignedtoachievetothe
greatestextentpossibletheratesthatwouldbenegotiatedinanunconstrainedmarket.
Totheextentthatitenumeratesspecificfactors,theyshouldbeonesthatmight
reasonablybeconsideredbycopyrightproprietorsandlicenseesintherealworld.In
theOfficesview,thereisnopolicyjustificationtodemandthatmusiccreatorssubsidize
thosewhoseektoprofitfromtheirworks.
Undersuchaunifiedstandard,theCRBorotherratesettingbodywouldbeencouraged
toconsiderallpotentiallyusefulbenchmarksincludingforanalogoususesofrelated
rights(e.g.,feespaidforthecomparableuseofsoundrecordingswhenconsidering
musicalworkrates780)inconductingitsanalysis.Butagain,itshouldtakeintoaccount
onlythosefactorsthatmightbeexpectedtoinfluencepartieswhonegotiatedratesinthe
openmarket.Thesemightinclude,forexample,thesubstitutionalimpactofonemodel
onothersourcesofrevenue,orwhetheraservicemaypromotesalesofsound
recordingsormusicalworksthroughotherchannels.781Butuponarrivingatrates
believedtoreflectwhatwouldbeagreedintheopenmarket,thoserateswouldnotbe
discountedonthebasisofabstractpolicyconcernssuchasdisruptiveimpacton
48%ofitsrevenuetoartistsandlabelsusingthewillingbuyerwillingsellerstandardandonly
4%ofitsrevenuetopublishersandsongwritersusingratessetbytheratecourt.);SpotifyFirst
NoticeCommentsat7.
But seeDigitalPerformanceRightinSoundRecordingsandEphemeralRecordings,72Fed.
Reg.24,084,24,09495(May1,2007)(musicalworkbenchmarkrejectedasbeingflawedfor
soundrecordingsbecausethesellersaredifferentandsellingdifferentrights,useofthe
benchmarkwouldignorethedifferentinvestmentsandincentivesoftheeachseller,andthe
recordcontainedampleempiricalevidencethatthemarketsarenotnecessarilyequivalent);
Pandora Ratesetting,6F.Supp.3dat333,36667(courtdeclinedtouseroyaltyratesforsound
recordingsasabenchmark,explaining,[t]hedisparitybetweenratesforthepublicperformance
ofcompositionsversussoundrecordingsdoesnotexistformostofASCAPsrevenuestreams
since...theneedtoacquiresoundrecordinglicensesonlyappliestoserviceswhoconduct
digitalaudiotransmissions[,]forthosedigitalaudiotransmissions,whoseratesaresetbythe
CRB,thereisastatutoryprohibitiononconsideringsoundrecordingratesinsettingaratefora
licenseforpublicperformanceofamusicalworkandotherwisetherecordisdevoidofany
principledexplanationgiven...whytherateforsoundrecordingrightsshoulddictateany
changeintherateforcompositionrights.).
780
Asexpressedinsection114,thewillingbuyer/willingsellerstandardincludesconsiderationof
severalspecificfactors,includingthese.See 17U.S.C.114(f)(2)(B).
781
144
U.S.CopyrightOffice
prevailingindustrypracticesorsolicitudeforexistingbusinessmodelsnotwithstanding
theircompetitiveviabilityinthemarketplace.
C. Role of Government in Music Licensing

Governmentregulationofmusichasfocusedontheinterrelatedconcernsofaccess,
pricingandcompetition.Asnotedabove,section115thefirstcompulsorylicensein
ourcopyrightlawwasenactedtopreventasinglepianorollcompanyfromexercising
exclusivecontroloversongcopyrights.ThePROconsentdecreesaretheresultofthe
governmentsattempttobalancetheefficienciesofcollectivelicensingwithconcerns
aboutanticompetitiveconduct.Morerecently,Congresschosetoextendthepublic
performancerightfordigitalusesofsoundrecordingsontheconditionthatcertainof
thoseuseswouldbesubjecttocompulsorylicensingundersections112and114ofthe
CopyrightAct,thusfurtherextendingthepracticeofregulatoryoversight.
Asaresultofthesepolicydeterminations,anadministrativetribunal,theCRB,setsthe
feespaidforthereproductionanddistributionofmusicalworks,aswellastheroyalties
dueforradiostyledigitalperformanceofsoundrecordings.TwofederaljudgesinNew
YorkCityareresponsibleforestablishingthefeesforthepublicperformanceofmusical
worksacrosstraditionalanddigitalplatforms.Forbetterorworse,thesedecadesold
regimesaredeeplyembeddedinourlicensinginfrastructure.782
Viewedintheabstract,itisalmosthardtobelievethattheU.S.governmentsetsprices
formusic.Intodaysworld,thereisvirtuallynoequivalentforthistypeoffederal
interventionatleastoutsideofthecopyrightarena.783Theclosestexampleisthe
retransmissionbycableandsatelliteprovidersofcopyrightedtelevisionprogramming
(includingthemusicembodiedinthatprogramming),whichisalsosubjectto
compulsorylicensingundertheCopyrightActandgovernmentsetrates.784But
Notably,inthedeliberationsleadingtotheadoptionofthe1976Act,thenRegisterof
CopyrightsAbrahamL.Kaminsteinrecommendedeliminationofthesection115compulsory
license,concludingthattheunderlyingconcernsaboutapublishermonopolywerenolonger
relevant. See GENERALREVISIONOFCOPYRIGHTREPORTat36.Publishersdidnotultimately
pursuethatopportunity,however,insteadagreeingtomaintainthecompulsorylicensein
exchangeforastatutoryratehikefrom2to2.75centsperuse.See Music Licensing Reform Hearing
(statementofMarybethPeters,RegisterofCopyrights);S.REP.NO.94473,at8892.
782
Outsideofthecopyrightcontext,rareinstancesofgovernmentpricefixinginvolve
commodities,notdifferentiatedgoods.TheFederalEnergyRegulatoryCommissionconductsa
ratesettingprocessforinterstatetransmissionofelectricityandnaturalgas,see16U.S.C.824d,
824e,15U.S.C.717c,717d,andtheUnitedStatesDepartmentofAgricultureissuesfederalmilk
marketingordersthatsetminimum(notmaximum)pricesforthesaleofmilkinmostregionsof
theUnitedStates,see7U.S.C.608c(5).
783
17U.S.C.111,119,122;see also U.S.COPYRIGHTOFFICE,SATELLITETELEVISIONEXTENSIONAND

LOCALISMACT:302REPORT12940(2011),available athttp://www.copyright.gov/reports/
784
145
U.S.CopyrightOffice
retransmissionrightsrepresentamuchmorelimitedsegmentoftheoverallrevenuesfor
thetelevisionindustrythandothecoremusicmarketssubjecttogovernment
ratesetting,andeventhere,broadcastersarepermittedseparatelytonegotiatenon
governmentcontrolledfeesforaccesstothesignalsthatcarrythecopyrightedworks.785
1. Antitrust Considerations
Asexplainedaboveindiscussingthesection115statutorylicenseandPROconsent
decrees,muchoftherationaleindeed,theoriginalrationaleforgovernment
regulationofthemusicmarketplacerevolvesaroundantitrustconcerns.The
governmenthaslongwantedtoensurethatthemarketisnotundulyinfluencedby
monopolypower.Thus,Congressuneasinesswiththedominantpositionofthe
Aeolianpianorollcompanyin1909ledittoenactacompulsorylicenseformusical
workssootherscouldcompetewiththatcompany.
Concernsaboutpotentialmonopolyeffectsareheightenedwhenwouldbecompetitors
decideonthepricestobechargedforproductsorproductsarerequiredtobepurchased
together,asisthecasewhenmusicalworksarelicensedbymultipleownersonablanket
basisthroughASCAPorBMI.Thegovernment,includingtheSupremeCourt,has
acknowledgedthesocialbenefitsofthistypeofcollectiveblanketlicensing,andhas
endorseditunderaruleofreasonapproachratherthanfindingitperseunlawful.786
Butthegovernmenthasalso,sincetheWorldWarIIera,subjectedASCAPandBMIto
extensiveregulationundertheirrespectiveconsentdecrees.
Itisworthnotingthatthelongevityofthesetwodecreesrepresentsaratherextreme
exceptiontothemodernDOJguidelineswhich,since1979,haverequiredthatsuch
decreesterminate,generallyafteraperiodofnolongerthantenyears.787Morerecently,
inMarch2014,theDOJannouncedapolicytofacilitatethefasttrackreviewand
terminationofmostperpetualorlegacydecrees.788Underthatpolicy,theDOJwill
section302report.pdf(STELAREPORT)(recommendingwaysinwhichthecableandsatellite
compulsoryretransmissionlicensesmightbephasedout).
See 47U.S.C.325.
785
BMI v. CBS,441U.S.at2325(holdingthattheblanketlicenseshouldbesubjecttoruleof
reasonanalysisandremandingtolowercourtstoapplythatanalysis);CBS v. ASCAP,620F.2dat
932(onremandfromSupremeCourt,sustainingblanketlicenseunderruleofreasonanalysis
becauseCBShadfailedtoprovethenonavailabilityofalternativestotheblanketlicense);Buffalo
Broad. v. ASCAP,744F.2dat92632(sustainingblanketlicenseunderruleofreasonanalysisin
contextoflocaltelevisionstations).
786
U.S.DOJ,ANTITRUSTDIV.,ANTITRUSTDIV.MANUALIII14647(5thed.2014),available athttp://
www.justice.gov/atr/public/divisionmanual/atrdivman.pdf.
787
Id.(explainingthattheDOJsadoptionofapolicythatfavorssunsetprovisionswasbasedon
ajudgmentthatperpetualdecreeswerenotinthepublicinterest).Inadditiontopolicy
788
146
U.S.CopyrightOffice
advisecourtsthatpre1980legacydecrees,exceptinlimitedcircumstances,are
presumptivelynolongerinthepublicinterest.789TheDOJhassuggested,however,
thatamongthoselimitedcircumstancesiswhenthereisalongstandingrelianceby
industryparticipantsonthedecree.790TherevisedDOJpolicywouldthusappearto
excludethePROdecrees.
Thewordmonopolycameupmanytimesinthewrittenandoralpresentationsof
participantsinthisstudyindiscussingthecontinuingsignificanceofthedecreesand
antitrustoversight.Butitisimportanttounderstandthattherearetwodistincttypesof
monopolybeingreferenced,andeachrequiresseparateanalysis.
Thefirsttypeofmonopolyreferstoallegedanticompetitivepracticesonthepartof
thePROs,andalsosometimesofthemajorpublishersandrecordlabelswithsignificant
marketshare.Heretheconcernisthatlicenseesforexample,atelevisionnetworkor
onlineservicehaveinsufficientleveragetonegotiateappropriatelicensingfeeswith
thelicensor.791Excessivemarketpoweristhelinchpinofantitrustanalysis,whetherina
governmentinitiatedenforcementactionorprivatelitigation;792typically,howeverand
asdiscussedbelowinconnectionwiththePandora litigationtheremediesforcivil
concerns,theremaybesomeinterestingdueprocessquestionsconcerningthelengthofthe
consentdecrees.
PressRelease,U.S.DOJ,AntitrustDiv., AntitrustDivisionAnnouncesNewStreamlined
ProcedureforPartiesSeekingtoModifyorTerminateOldSettlementsandLitigatedJudgments
(Mar.28,2014),available athttp://www.justice.gov/atr/public/press_releases/2014/304744.pdf
(notingthat[s]ince1980,therehavebeensignificantchangesinmarketsandtechnologyand
substantialchangesinantitrustlaw).
789
790
Id.
Interestingly,theOfficeheardconsiderablylessaboutthemarketpoweroflargetechnology
companiesorotherdominantdistributorsofmusicandwhetherthatposessimilarconcerns.But
see, e.g., MMF&FACSecondNoticeCommentsat2122(notingthemarketpowerofafewtech
giants).
791
See U.S.DOJ&FTC,ANTITRUSTENFORCEMENTANDINTELLECTUALPROPERTYRIGHTS:
PROMOTINGINNOVATIONANDCOMPETITION110(2007),available at http://www.justice.gov/atr/
public/hearings/ip/222655.pdf(ANTITRUSTENFORCEMENTANDIPRIGHTSREPORT)(Whetherthe
legalanalysisappliedtointellectualpropertybundlingissomeformoftheperse ruleorthe
moresearchingruleofreason,aplaintiffwillhavetoestablishthatadefendanthasmarket
powerinthetyingproduct.);cf. Illinois Tool Works Inc. v. Indep. Ink, Inc., 547U.S.28,4243(2006)
(explainingthefollowingabouttyingarrangementinvolvingpatentedproducts:Whilesome
sucharrangementsarestillunlawful,suchasthosethataretheproductofatruemonopolyora
marketwideconspiracy,...thatconclusionmustbesupportedbyproofofpowerintherelevant
marketratherthanbyamerepresumptionthereof.);see also HERBERTHOVENKAMP,F EDERAL
ANTITRUSTP OLICY: THELAWOF COMPETITIONAND ITSPRACTICE2(4thed.2011)(Animportant
goalofantitrustlawarguablyitsonlygoalistoensurethatmarketsarecompetitive.).
792
147
U.S.CopyrightOffice
antitrustviolationsdonotinvolvelongtermgovernmentpricecontrols.Suchremedies
insteadtendtofocusoninjunctiverelieftoaddresstheparticularanticompetitive
behaviorinquestionand/orthepaymentofonetimefines.793
Thesecondtypeofmonopolyreferencedbyparticipantsisawhollydifferentone,
namely,thelimitedmonopolyinanindividualworkthatisconferredbyvirtueofthe
exclusiverightsgrantedundertheCopyrightAct.Eventhoughitisnotaproductof
collectiveactivity,theseexclusiverightsprobablyplaynolessofasignificantrolein
debatesaboutmusiclicensing.Manylicenseesforexample,largeonlineproviders
believetheymusthaveaccesstocomplete,orvirtuallycomplete,catalogsofsound
recordingsandmusicalworksinordertocompeteinthemarketplace.Acompulsory
licenseatleastintheorycanmakethatpossible.
Butcompulsorylicensingremoveschoiceandcontrolfromcopyrightownerswhoseek
toprotectandmaximizethevalueoftheirassets.Anincreasinglyvocalnumberof
copyrightownersbelievetheyshouldbeabletowithholdtheirworksfromlowpaying
orotherwiseobjectionabledigitalservices,inpartbecausesuchservicesmaycannibalize
salesorhigherpayingsubscriptionmodels.TaylorSwiftswidelypublicizeddecisionto
pullhercatalogfromtheleadingstreamingproviderSpotifybecauseshedidnotwant
hersongsavailableonSpotifysfreetierofservicehasbeenwidelyreported,andother
artistsappeartobefollowingsuit.794Similarly,artistmanagerIrvingAzoffofGMRhas
reportedlythreatenedYouTubewithabilliondollarlawsuitiftheydonotremovehis
clientsrepertoirefromtheirsite.795Inordertotakesuchactionanddemandhigher
See, e.g., FarrellMalone&J.GregorySidak,Should Antitrust Consent Decrees Regulate Post

Merger Pricing?,3J.COMPETITIONL.&ECON.471,477(2007)(explainingthat,inexpressingits
preferenceforstructuralremediesoverconductremediesinsituationsinvolvinganticompetitive
merger,theDOJexplicitlycriticizespriceagreementsasacomponentofconsentdecreesand
thatthe[DOJ]disfavorsusingconsentdecreestofixapriceoranallowablerangeofpricesfor
thepostmergerfirm); see also HERBERTHOVENKAMP,MARKD.JANIS,MARKA.LEMLEY&
CHRISTOPHERR.LESLIE,IPANDANTITRUST:ANANALYSISOFANTITRUSTPRINCIPLESAPPLIEDTO
INTELLECTUALPROPERTYLAW2262(2ded.Supp.2013)(Asageneralmatter,antitrustshouldnot
favorsolutionsthatturnthefederalcourtsintopricecontrolagencies.).
793
Dickey,Taylor Swift on 1989, Spotify, Her Next Tour and Female Role Model (quotingTaylorSwift:
Ithinkthatpeopleshouldfeelthatthereisavaluetowhatmusicianshavecreated,andthats
that.)see MitchellPeters,Big Machines Scott Borchetta Explains Why Taylor Swift Was Removed
From Spotify,BILLBOARD(Nov.8,2014),http://www.billboard.com/articles/news/6312143/big
machinescottborchettaexplainstaylorswift1989removalfromspotifynikkisixx(quotingBig
MachineLabelGroupCEOScottBorchetta:Wedeterminedthatherfanbaseissoinonher,lets
pulleverythingoffofSpotify,andanyotherservicethatdoesntofferapremiumservice...Now
ifyouareapremiumsubscribertoBeatsorRdiooranyoftheotherservicesthatdontofferjusta
freeonly,thenyouwillfindhercatalogue.);Bogursky,Taylor Swift, Garth Brooks and other artists
lead the fight against Spotify.
794
Gardner,Pharrell Williams Lawyer to YouTube: Remove Our Songs or Face $1 Billion Lawsuit.
795
148
U.S.CopyrightOffice
compensationtheusecannotbesubjecttomandatorylicensing.796Butforthoseunder
acompulsorylicenseoraconsentdecree,itisnotpossibletosayno.
Inthisregard,itisinterestingtocomparemusictoothertypesofcopyrightedworks,for
example,televisionshowsandmovies.Likemusic,aparticulartelevisionshowor
moviemaynotbeafullysatisfyingsubstituteforanotherorasubstituteatall.But
consumersdonotexpecttobeabletoaccesseverytelevisionshowthroughHulu,or
everymoviethroughNetflix.Itisunderstoodthatdifferentservicescanandwilloffer
differentcontent.
Evenwithinthemusicuniverse,thelawtreatssoundrecordingsandmusicalworks
differentlywithrespecttotherighttosayno.Weseemtoacceptthefactthatalicensee
offeringdownloadsorinteractivestreamingwillneedtonegotiatedealswithmajorand
independentrecordlabels,orforgothecontent.Onthemusicalworkside,however,
governmentpolicyhassubjectedthesesameusestogovernmentmandatedlicensing.
Evengivengreaterlatitudetomakelicensingdecisions,itwouldseemthatmusical
workownerswouldbestronglyincentivizedtolicenseservicesthattheybelieved
wouldpayareasonablereturn.Thisseemstobetrueoftherecordlabels,whichhave
authorizedawiderangeofdownloadandinteractivemusicservicesoutsideofa
mandatorylicensingregime.797Butthelabelsarenotrequiredtolicenseservicesthat
showlittlepromiseorvalue.Whyisthisdemandedofmusicpublishersand
songwriters?
TheOfficebelievesthatthequestionofwhethermusiccopyrightownersshouldbeable
tochoosewhethertoagreetoalicenseisanespeciallycriticalone.Understandably,
thoseseekingpermissiontousemusicappreciatethesecurityofcompulsorylicensing
processesandcertaintyofgovernmentsetratesasbuyersofcontentlikelywouldin
anycontext.798Butmoderncompetitionlawdoesnotviewtherightsenjoyedby
copyrightownersasintrinsicallyanathematoefficientmarkets.AstheDOJitselfhas
explained,antitrustdoctrinedoesnotpresumetheexistenceofmarketpowerfromthe
merepresenceofanintellectualpropertyright.799
Notably,Swiftssoundrecordingsarenotsubjecttocompulsorylicensingwhenusedfor
interactiveservices,andGMRsclientswhoarenotrepresentedbyACSCAPorBMIhave
assertedrightsnotcoveredbytheconsentdecrees.
796
RIAAFirstNoticeCommentsat30n.43;see alsoFind a Music Service,WHYMUSICMATTERS.COM,

http://whymusicmatters.com/findmusic(lastvisitedFeb.2,2015)(listinglicensedmusic
services).
797
Forexample,ina2011studyconductedbytheCopyrightOffice,cableandsatelliteoperators
operatingunderthesection111,119and122compulsorylicensesexpressedstrongoppositionto
thepossibilityofphasingthemout.STELAREPORTat8.
798
799
ANTITRUSTENFORCEMENTANDIPRIGHTSREPORTat2.
149
U.S.CopyrightOffice
Asageneralmatter,theOfficebelievesthatcertainaspectsofourcompulsorylicensing
processescanandshouldberelaxed.Butthisdoesnotmeanthatantitrustconcerns
shouldbeoverlooked.ManypertinentconsiderationshavebeenraisedintheDOJs
parallelconsiderationoftheASCAPandBMIconsentdecrees.TheOfficestrongly
endorsesthatreview,andinlightofthesignificantimpactofthedecreesintodays
performancedrivenmusicmarkethopesitwillresultinaproductivereconsideration
ofthe75yearolddecrees.Atthesametime,theOfficeobservesthatitisCongress,not
theDOJ,thathastheabilitytoaddressthefullrangeofissuesthatencumberourmusic
licensingsystem,whichgofarbeyondtheconsentdecrees.
2. The PROs and the Consent Decrees

Sincethefirstpartofthetwentiethcentury,ASCAPandBMIhaveprovidedcritical
servicestosongwritersandmusicpublishersontheonehand,andmyriadlicenseeson
theother,infacilitatingthelicensingofpublicperformancerightsinmusicalworks.
SESAC,thoughsmaller,hasalsoplayedanimportantroleinthisarea,administering
performancerightsforaselectgroupofclients.Morerecently,GMRhascomeontothe
sceneasafourthcontenderintheperformancerightsarenawithanimpressiveclient
roster.Eachoftheseorganizationsoffersrepertoirewideorblanketlicensesfor
themusicalworkstheyrepresent,withthefourtogetheressentiallyrepresentingthe
entirespectrumofmusicalworksavailableforlicensingintheU.S.,includingmany
foreignworks.Blanketlicensesareavailableforawiderangeofuses,including
terrestrial,satellite,andinternetradio,ondemandmusicstreamingservices,website
andtelevisionuses,theperformanceofrecordedmusicinbars,restaurants,andother
commercialestablishments,andliveperformancesaswell.
Asdetailedabove,bothASCAPandBMI,unliketheirsmallercompetitorsSESACand
GMR,aresubjecttocontinuingconsentdecrees.Thedecrees,overseenbyfederal
districtcourtsinNewYorkCity(typicallyreferredtoastheratecourts),werelast
updatedbeforetheriseoflicenseddigitalmusicservicesinthecaseofBMI,in1994,
andinthecaseofASCAP,in2001.Theconsentdecreesimposesignificantgovernment
mandatedconstraintsonthemannerinwhichASCAPandBMImayoperate.Among
otherthings,ASCAPandBMIarerequiredtograntalicensetoanyuserwhorequests
one,withoutpaymentofroyaltiesuntilaroyaltyrateissetbynegotiationorfollowing
litigationbeforetheratecourt.Underitsdecree,ASCAPmaynotissuemechanical
licensesforthereproductionordistributionofmusicalworks;whiletheBMIconsent
decreeissilentonthispoint,BMIhasnotitselfissuedmechanicallicenses.Excepttothe
extentalicenseeseeksanarrowerlicensesuchasaperprogramlicenseorablanket
licensewithcarveoutsfordirectlylicensedworksASCAPandBMIarerequiredto
licenseallworksintheirrepertoire.
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U.S.CopyrightOffice
a. Pandora Analysis
Publisher Withdrawals
In2013,aspartofpendingratesettinglitigationwiththeinternetradioservicePandora,
boththeASCAPandBMIratecourtsapplyingslightlydifferentlogicinterpretedthe
consentdecreesasprohibitingmusicpublishersfromwithdrawingauthorizationto
licensetheirsongsforparticulartypesofuses.800Majormusicpublishershadsoughtto
withdrawtheirnewmedia(i.e.,onlineandmobileusage)801rightsfromthePROsinan
efforttonegotiatewithPandoradirectlytoachievehigherratesthanwhattheybelieved
theywouldotherwisebeawardedincourt.802
Followingtheirdecisionstowithdrawal,EMIagreedtoarateequivalenttotheexisting
ASCAPrateof1.85%forserviceslikePandora(butwithoutdeductionsforASCAPs
fees);Sony/ATVnegotiatedforaproratedshareofanindustrywiderateof5%(which
translatedtoa2.28%impliedrateforASCAP);andUMGobtainedaproratedshareof
7.5%(ora3.42%ASCAPrate).803Subsequently,however,thetworatecourtsheldthat
thesepublisherscouldnotselectivelywithdrawspecificrightsfromASCAPorBMItobe
negotiatedindependently.Instead,thepublishershadtobeallinorallout.804
Inthewakeofthesedecisions,thethreepublisherswhohadsoughttowithdraw,(now
two,asSony/ATVhassincebecomeaffiliatedwithEMI),are,forthemoment,backin,
andASCAPandBMIhavepetitionedtheDOJtomodifytheirdecreestoallowthese
sortsofpartialwithdrawalsbytheirpublishermembers.Withthepetitionspending,
however,bothSony/ATVandUMPGwhichtogetherrepresentsome50%ofthemusic
publishingmarket805havemadeitclearthattheymaywellchoosetowithdrawall
rightsfromthePROsinthefuture.
800
In re Pandora,2013WL5211927,at*11;BMI v. Pandora,2013WL6697788,at*5.
Newmediaservicesarethoseavailablebymeansoftheinternet,awirelessmobile
telecommunicationsnetwork,and/oracomputernetwork.In re Pandora,2013WL5211927,at*2;
BMI v. Pandora,2013WL6697788,at*2.
801
Tosomedegree,themovetowithdrawwasalsolikelyspurredbytechnologicalevolution.
Unliketraditionalmediasuchasbroadcastradiostations,digitalprovidersareequippedtotrack
andreporteachuseofamusicalwork(forexample,eachtimeasongisstreamedtoanindividual
subscriber)andthusprovidefullcensusreportingtoacopyrightowner.Whensuchcensus
reportingisavailable,thereisnoneedforanintermediaryorganizationsuchasaPROtosurvey
orsampletheservicetoallocateroyaltypaymentsamongsongwriters;apublisherhasthemeans
toallocatetheroyaltiesitself.Thus,itismorefeasibleforthepublishertoselfadministera
directlynegotiatedlicense.
802
Pandora Ratesetting,6F.Supp.3dat330,33940,355.
803
In re Pandora,2013WL5211927,at*11;BMI v. Pandora,2013WL6697788,at*5.
804
Christman,FirstQuarter Music Publishing Rankings: SONGS Surges Again.
805
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U.S.CopyrightOffice
ThespecterofacrosstheboardwithdrawalbythemajorpublishersfromASCAPand
BMIisconcerningtomanyinthemusicsector.ThethreemajorpublishersSony/ATV,
UMPG,andWarner/Chappelltogetherrepresentapproximately63%oftheU.S.music
publishingmarket,806andthesongwriterstheyrepresent(aswellasthepublishers
themselves)currentlylicensethevastmajorityoftheirperformancerightsthroughthe
PROs.807TheOfficeagreesthatthefullwithdrawalofleadingpublishersfromASCAP
andBMIwouldlikelysignificantlydisruptthemusicmarketbyfundamentallyaltering
thelicensingandpaymentprocessforthepublicperformanceofmusicalworkswithout
anestablishedframeworktoreplaceit,atleastintheshortrun.
Ontheuserside,asmightbepredicted,manystronglypreferthegovernment
supervisedPROsystemovertheunregulatednegotiationofrights,andopposethe
movementtowardwithdrawal.Whilemanylicenseessuchascommercialradioand
televisionstationsrepresentedbyRMLCandTMLCaresuccessfulinnegotiating
(ratherthanlitigating)rateswithASCAPandBMIunderthecurrentregime,itis
reassuringtothemtoknowthattheycanturntoafederalcourtiftheyviewitasabetter
option.Liketheradioandtelevisionsectors,digitalservices,includingPandora(whose
recentratecourtlitigationisdiscussedbelow),alsostronglyfavorgovernmentoversight
ofmusicpublisherslicensingpractices.
Notably,althoughSESACisnotsubjecttoaconsentdecree,televisionandradio
licenseesrecentlysuedthatorganizationinseparateactionsforallegedanticompetitive
licensingpractices.808SESACsettledthetelevisioncasebyagreeingtoreimbursethe
televisionstationplaintiffsalmost$60millioninlicensingfees809(theradiocaseremains
pending).Withoutopiningontheirmerits,theOfficeobservesthatthesecasesillustrate
theimportanceandcorrectivepotentialofprivateenforcementactionsoutsideofthe
consentdecreeenvironment.
Concernsabouttheimpactoflargepublisherwithdrawalsarenotlimitedtotheuser
side.Songwriters,too,areapprehensive.Accordingtolongstandingindustrypractice,
songwritersarepaidtheirwritersshareofperformanceroyaltiesdirectlybythe
PROs;thesemoniesdonotflowthroughthepublishers.Inaworldofdirectlicensing,
publisherswouldnotberequiredtoadheretoestablishedstandardsforthereporting
andpaymentofroyalties,suchasthoseemployedbyASCAPandBMI.Songwriters
See id.
806
See Sisario,Pandora Suit May Upend CenturyOld Royalty Plan.
807
See Meredith Corp.,1F.Supp.3d180;RMLC v. SESAC,29F.Supp.3d487.
808
See MemorandumofLawinSupportofPlaintiffsUnopposedMotionforPreliminary
ApprovalofSettlement12,Meredith Corp. v. SESAC, LLC.,1F.Supp.3d180(S.D.N.Y.2014)(No.
09cv9177);Meredith Corp. v. SESAC, LLC,No.09cv9177(S.D.N.Y.Oct.31,2014)(ordergranting
preliminaryapprovalofsettlement).
809
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U.S.CopyrightOffice
worrythatdirectlicensingcouldthusresultinasystemwithmuchlessaccountability
andtransparencythantheycurrentlyenjoyunderthePROs.
Thereisaparticularconcernaboutpublisherstreatmentofadvancepaymentsand
licensingfeesbymusicservices,assuchmoniesmaynotbeaccountedforbythe
publisherinatransparentfashion.This,inturn,raisesaquestioninsongwritersminds
astowhetherwithdrawalwouldexacerbatethisproblem.810Inaddition,apartfromany
contractualissuesinrelationtoAmericansongwriters,nonU.S.writerswhoassigntheir
rightsexclusivelytotheirlocalsocietieswhichinturnenterintocontractual
relationshipswithASCAPandBMItocollectroyaltiesontheirbehalfintheUnited
StatesdonotseehowtheycanproperlybesubjecttoU.S.publisherwithdrawal.811On
topofallthis,aprecipitousdeclineinoverallroyaltythroughputwouldalmostcertainly
resultinmarkedlyincreasedandperhapsprohibitiveadministrativecostsforthose
whoremainedaffiliatedwithASCAPandBMI.
Aninterestingquestioniswhethersignificantlydecreasedmarketsharesonthepartof
ASCAPandBMIduetomajorpublisherwithdrawalswould,paradoxically,obviatethe
needforongoinggovernmentcontrolofthoseorganizations.Fromapractical
perspective,onemightquestionwhyASCAPandBMIwouldremainsubjectto
significantgovernmentcontrolsiflargermarketcompetitors(i.e.,themajorpublishers)
werenotsubjecttosuchsupervision.WeassumethattheDOJmayaddressthisissuein
itsforthcominganalysis.
Rate Decision
Followingtherulingsonwithdrawal,theASCAPcourt,inalengthyopinion,proceeded
todetermineareasonablefeeof1.85%forPandora,applyingahypotheticalfair
marketvaluestandard.812Insodoing,thecourtwasdismissiveofthepublishers
frustrationswiththeratecourtprocessandtheirenvyofthemuchhigherratesbeing
paidbyPandoratosoundrecordingowners(over50%ofrevenuesversusthe
publisherscombinedmarketshareof4%)813whichsoundrecordingratesinanyevent
thecourtcouldnotconsiderasaresultofthestatutorybarinsection114(i).814
See, e.g.,SGAFirstNoticeCommentsat89.
810
MMF&FACSecondNoticeCommentsat46(reproducingtheMMFPublicresponsetothe
Sony/ATVStatement).
811
Pandora Ratesetting,6F.Supp.3dat35354,372.
812
Id.at333,366.
813
17U.S.C.114(i)providesthat[l]icensefeespayableforthepublicperformanceofsound
recordings...shallnotbetakenintoaccountinany...proceedingtosetoradjusttheroyalties
payabletocopyrightownersofmusicalworksforthepublicperformanceoftheirworks.
814
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U.S.CopyrightOffice
ThecourtsharplycriticizedSony/ATVsandUMPGseffortstonegotiatehigherrates
withPandoraoutsideoftheconfinesoftheconsentdecreethatcouldthenserveas
benchmarksintheratecourtproceeding.Findingthepublisherstacticsobjectionable
especiallyinlightofthefactthatPandoracouldfacelargescalecopyrightliabilityifit
failedtoconcludelicensesitrejectedtheoutsideagreementsassuitablebenchmarks.815
Amongotherthings,thecourttookissuewithSony/ATVsandUMPGsfailureto
providelistsofthecompositionstheyownedtoPandorasoPandoracouldremovetheir
respectiveworksfromitsserviceifnecessary.816
WhilethecourtsopinionsuggeststhatSony/ATVandUMPGmayhaveengagedin
anticompetitivebehaviorbypurposefullyset[ting]outtocreatehigherbenchmarks,
andalsoexpressedconcernaboutthepublisherscoordinatedbehaviorin
withdrawingnewmediarightsaswellastheiraggressivenegotiationstrategiesthe
courtultimatelyconcludedthatithadnoneedtoexplorewhichifanyof[their]actions
waswrongfulorlegitimate.817Inthisregard,whileitwasnottheonlyaspectofthe
publishersconductthattroubledthecourt,itishardtoseehowthemeredesiretoseek
higherroyaltyratescouldconstituteanantitrustviolationorthefactthattheCEOof
Sony/ATVappearedinanewsarticleinshirtsleeveswithalargecigarinhismouthto
boastofthehigherratehehadnegotiatedwithPandora.818
Undoubtedly,thePandoracourtbelieveditselftobecarryingoutthepurposeofthe
ASCAPdecree,andthedecree,ofcourse,ismeanttoaddressantitrustconcerns.Butthe
opinionisnotableforitsfocusonthebehaviorofahandfulofactorsinsteadofan
empiricallybasedeconomicanalysisoftheproperrateforPandora.Forexample,
rejectingASCAPsargumentsthatthecourtshouldconsiderPandorascommercial
successaspartofitsinquiry,thecourtopinedthatmarketshareorrevenuemetricsare
poorfoundationsonwhichtoconstructareasonablefee.819Yetitseemsthatthese
factorsmightwellbeconsideredbypartiesinanactualmarketnegotiation.
Additionally,evenassumingforthesakeofargumentthatSony/ATVsandUMPGs
negotiationtacticshadunequivocallybeenfoundbythecourttocrossthelinefrom
forcefulnegotiationstoanticompetitiveconduct,itmustberememberedthattherateset
bythecourtappliesnotonlytothosecompanies,buttoallotherpublisherand
songwritermembersofASCAPaswell.Suchacourtorderedrateisalsolikelyto
heavilyinfluencethemarketfortheotherPROs,andhencetheindustryasawhole.A
questionarises,then,astowhetherthecourtsrepudiationofspecificconductonthe
Pandora Ratesetting,6F.Supp.3dat36061
815
Id.at34546,361.
816
Id.at35758.
817
Id.at347.
818
Id.at369.
819
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U.S.CopyrightOffice
partofsomebyrejectingthepossibilityofahigherraterepresentsafairoutcomeforthe
restoftheindustry.
Availability of Song Data
Asageneralmatter,theOfficeconcurswiththeapparentviewofthePandora courtthat
aserviceshouldbeabletoascertainwhatworksarecoveredunderalicensesoasto
permittheservicetoremoveunauthorizedworksifnecessary.Infringementliability
shouldnotarisefromagameofgotcha.SincethePandora decision,itappearsthat
bothSony/ATVandUMPGhavemadeeffortstomaketheirsongdataavailableto
licensees.820Inadditiontosuchvoluntaryefforts,theOfficebelievesthatgovernment
policiesshouldstronglyincentivizethepublicavailabilityofsongownershipdatafor
worksinthemarketplace,atopicthatisaddressedinmoredepthbelow.
b. PRO Ratesetting Process

ThisabovesectionreviewsthePandora decisioninsomedetailbecauseitilluminatesan
importantpolicyconcern:namely,whetherweshouldcontinuetoblendantitrust
oversightwithindustryrateproceedingsasenvisionedundertheconsentdecrees.In
thePandoralitigation,thisapproachappearstohaveyieldedamixtureofcompetition
andratesettingconsiderations,withoutasatisfyinganalysisofeither.TheOfficeisof
theviewthatallegationsofanticompetitiveconductareworthyofevaluation(and,if
appropriate,remedialaction)separateandapartfromthequestionofafairrateand
viceversa.Eachofthesetwocriticalpolicyobjectivesmeritsgovernmentattentioninits
ownright.821
TheOfficethereforeproposesthattheratesettingaspectsofPROoversightbeseparated
fromwhatevergovernmentsupervisionisdeterminedstilltobenecessarytoaddress
antitrustconcerns.
Migrate to Copyright Royalty Board
AssumingPROratesettingisseparatedfromanyongoingantitrustoversight,theOffice
proposesthatthefunctionofestablishingratesbemigratedtotheCRB.822Industry
See EdChristman,Sony/ATV Makes Organized Catalog Available Online,BILLBOARD(July16,

2014),http://www.billboard.com/biz/articles/news/publishing/6157855/sonyatvmakes
organizedcatalogavailableonline;EdChristman,UMPG to Make Entire Database Easier for
Licensees,BILLBOARD(June27,2014),http://www.billboard.com/biz/articles/news/publishing/
6140985/umpgtomakeentiredatabaseeasierforlicensees.
820
SeeEPSTEINat36(concludingthatthereisnocomparativeadvantageinusingajudicialbody
asopposedtosomeadministrativeagencyforratesetting).
821
ASCAPandBMIalsoseektohaveratedisputesdecidedoutsideoffederalcourt.Bothhave
recommendedsomesortofsystemof(apparentlyprivate)arbitrationwithoutprovidingmuch
detail.ASCAPFirstNoticeCommentsat4,2324(recommendingexpeditedprivate
822
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U.S.CopyrightOffice
ratesettingis,ofcourse,aprimaryfunctionoftheCRB,andtheCRBhasthebenefitof
experienceassessingabroaderspectrumofraterelatedquestionsthanthefederalrates
courts.Significantly,theCRBsetsratesonthesoundrecordingsideaswellasfor
musicalworks.Italsohasinhouseeconomicexpertise.While,asdiscussedbelow,
interestedpartiesappeartoagreethatthestatutoryframeworkgoverningtheCRBs
procedurescouldstandsomeimprovement,onthewholeitseemsonlylogicalto
consolidatemusicratesettingproceedingsinasinglespecializedtribunal.
InofferingthesuggestionthattheCRBassumeresponsibilityfortheratesapplicableto
thepublicperformanceofmusicalworks,theOfficedoesnotmeantosuggestthatthe
CRBshouldnotquestionthelegitimacyofparticularbenchmarksifthereisreasontodo
so(astheCRBinfactroutinelydoesinratesettingproceedings).Buttheultimateaimof
theproceedingshouldbeafairratefortheindustryasawhole,ratherthanthe
enforcementofantitrustpolicy.TheOfficebelievesthataprocessfocusedonindustry
economicsratherthanantitrustanalysisoffersamoreauspiciousframeworktoestablish
broadlyapplicablerates.
UndertheOfficesproposal,discussedinmoredetailbelow,theCRB,liketherate
courts,wouldstepintosetarateonlywhenitcouldnotbeagreedasbetweenthe
relevantparties.Suchratesettingactivitieswouldnotneedtooccuronafiveyear
schedule,asunderthecurrentCRBsystem,butwouldbecommencedonanasneeded
basis,liketodaysproceedingsbeforetheASCAPandBMIratecourts.Additional
partiesseekingtoresolvethesamerateissuecouldbeofferedtheopportunitytojointhe
proceeding.Assumingtheexperienceweresimilartothatoftheratecourts,thevast
majorityofrateswouldbeagreedvoluntarilyratherthanlitigated.
Assumingtheratesettingauthorityforthepublicperformanceofmusicalworkswere
transferredfromtheratecourtstotheCRB,aquestionarisesastowhetherthe
separationofratesettingandantitrustresponsibilitieswouldprovidetheoccasionto
sunsetthedecreesandadoptamoremodernapproachtoantitrustoversightinthisarea.
Underamoreflexibleapproach,theDOJwouldinvestigateandaddresspotential
anticompetitivebehavioronanasneededbasis,ratherthancontinuetoimpose
presumptiverestrictionsundertheconsentdecrees.Asnotedabove,private
arbitration);Music Licensing Hearingsat52(statementofMichaelONeill,CEO,BMI)(We

believethatreplacingthecurrentratecourtwitharbitrationinNewYorkundertheAmerican
ArbitrationAssociationruleswouldbeafaster,lessexpensive,andamoremarketresponsive
mechanismforallpartiestoobtainfair,marketvalueratedecisions.).Forthereasonsdiscussed
above,theOfficebelievestheCRBisthelogicalvenuetodeterminepublicperformancerates.As
anaddedbenefit,theCRBdoesnotdependuponthepaymentofprivatearbitrationfees(a
significantfactorinthedemiseoftheCARPsthatprecededtheCRB).SeeH.R.R EP. NO.108408,
at21,99100.Atthesametime,basedonstakeholdersinput,theOfficeisrecommendingcertain
changestotheCRBsystem,whichareoutlinedbelow.
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U.S.CopyrightOffice
enforcementactions,aswell,couldplayaroleinpolicingallegedmisconduct.Weleave
suchquestionsofantitrustpolicyfortheDOJtoanswer.
Section 114(i)
RegardlessofwhetherPROratesettingismigratedtotheCRB,asfurtherdiscussed
below,theCopyrightOfficeendorsestheproposalembodiedintheproposedSEA
legislation823thattheprohibitionin114(i)thatcurrentlypreventsratesettingtribunals
fromconsideringsoundrecordingperformanceroyaltiesbeeliminated.Originally
designedasaprotectivemeasuretobenefitsongwritersandpublishers,itappearstobe
havingtheoppositeeffect.ContrarytothesuggestionofthePandora court,824theOffice
doesnotunderstandwhy,absentsucharestriction,itmightnotberelevanttoconsider
soundrecordingroyaltiesinestablishingafairratefortheuseofmusicalworksshould
aratesettingauthoritybesoinclined.825
Interim Fees
Undertheconsentdecrees,anyonewhoappliesforalicensereceivesone.Thereisno
requirementofimmediatepayment.Asdiscussedabove,anapplicanthastherightto
performmusicalworksinaPROsrepertoirependingthecompletionofnegotiationsor
ratecourtproceedingsresultinginaninterimorfinalfee.826Sincetheconsentdecreesdo
notprovideforimmediateandconcurrentpaymentforusesmadeduringthese
periodsanddonotestablishatimeframeforthecommencementofaratecourt
proceedinganapplicantisabletopubliclyperformaPROscatalogofworksforan
indefiniteperiodwithoutpaying.827Needlesstosay,commercialentitiesdonot
typicallyreceiveasteadysupplyofproductformonthsoryearsbasedonamereletter
request.Butsuchisthecasewithmusic.
Theproblemisexacerbatedbythesubstantialburdenandexpenseoflitigatingaratein
federalcourtacontingencybothsidesseektoavoid.Licenseesmaypaynothingor
greatlyreducedfeesforyearsasnegotiationsdragon,whilestillenjoyingallofthe
benefitsofalicense.TheOfficeagreeswiththosecommenterswhohavesuggestedthat
thissystemunderwhichservicesmaylaunchandcontinuetooperatewithoutan
agreedratesignificantlyincreasestheleverageoflicenseesattheexpenseofthePROs
SEA,H.R.4079;SEA,S.2321,113thCong.(2014).
823
824
TheOfficedoesnotbelievethatthefactthatthelimitationwasoriginallyproposedbymusical
workowners,evenifillconceived,isasufficientbasistodetermineitshouldcontinueineffect.
825
See ASCAPConsentDecreeIX.E;BMIConsentDecreeXIV.A.
826
ASCAPFirstNoticeCommentsat1516;BMIFirstNoticeCommentsat1617.
827
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U.S.CopyrightOffice
andtheirmembers.828Becausethelicenseealreadyhasaccesstotheworksitneeds,
thereisnourgencytoagreetoarate.
Onceagain,theOfficedoesnotseewhymusicistreateddifferentlyfromthegoodsof
othersuppliersinthemarketplace.Afairandrationalsystemshouldrequirelicensees
topayatleastaninterimratefromtheinceptionoftheirservice,subjecttoatrueup
whenafinalrateisnegotiatedwiththePROorestablishedbytheratesettingauthority.
Notably,boththeASCAPandBMIconsentdecreesincludeaprocessfortheratecourt
tosetinterimrates.Inpractice,however,itseemsthatthisoptionwhich,atleastfor
BMI,entailsuptofourmonthsofdiscoveryandmotionpractice829isnotcommonly
exercised.Likelythisisduetopartiesreluctancetoundertaketheconsiderableburden
andexpenseoffederalcourtlitigation,especiallywhentheresultisonlyatemporary
one.830
TheOfficeisoftheviewthattotheextentalicensingentityisrequiredtograntalicense
uponrequest,thereshouldbeaviable(notmerelytheoretical)mechanismfor
example,abrief,singledayhearingbeforetheratesettingauthority(e.g.,theCRB)to
setaninterimroyaltyratewithoutundueburdenorexpense.Whilenothingiseveras
simpleasitseems,theOfficebelievesthataworkablesystemshouldbefeasible.For
example,alicenseecouldberequiredtoshareawrittendescriptionofthematerial
aspectsofitsproposedservice,afterwhichbothpartieswouldprofferlistsofrelevant
ratesalreadyineffect,whichtogetherwouldserveasguidanceforthedecisionmaker.It
shouldnotbenecessarytohaveanelaborateprocedurewhenthetemporaryratecanbe
adjustedretroactively.Inadditiontobeingmoreequitableformusicowners,theOffice
believesrequiringlicenseestopayaninterimratewouldprovidegreaterincentiveto
resolveratesthroughvoluntarynegotiationsattheoutset.
c. Partial Withdrawal of Rights

AprimaryfocusofthecommentarytotheCopyrightOfficeandtotheDOJinits
reviewoftheconsentdecreesismusicpublishersability(orinability)towithdraw
specificcategoriesoflicensingrightsfromtheirauthorizationstothePROs.The
See also, e.g., MMF&FACSecondNoticeCommentsat10(Asfarasweknowmostofthe

societiesintheEUrequirepotentiallicenseestoprovideimportantfinancialandoperationaldata
(andinthecaseofastartup,theirbusinessprojections,andprojectedusernumbers)when
makingtheirapplication.Tousthisseemssoundcommonsenseand,coupledwithanabilityby
societiestorequireaninterimpayment,wouldrebalancethenegotiatingprocessmorefairly.).
828
See BMIAntitrustConsentDecreeReviewCommentsat2021.TheASCAPconsentdecree
requiresthatthecourtsetaninterimratewithin90daysofarequest.See ASCAPAntitrust
ConsentDecreeReviewCommentsat12.
829
See ASCAPAntitrustConsentDecreeReviewCommentsat14n.20; BMIAntitrustConsent

DecreeReviewCommentsat21.
830
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U.S.CopyrightOffice
purposeofsuchwithdrawalswouldbetoallowmusicownerstonegotiateinthe
marketplacefortheexploitationoftheirsongsor,ifnotsatisfiedwiththepriceoffered,
towithholdtheirsongsfromparticularservices.Thishasananaloginmuchofthe
discussionsurroundingsection115,anotherareawherepublishersandsongwritersseek
theabilitytoescapefrommandatorylicensing.
Asnotedabove,exceptinthecaseofinternetradioprovidersthatqualifyforthesection
112and114statutorylicenses,recordcompaniesarefreetonegotiatewithpotential
licenseesintheopenmarket.Butformusicpublishers,itistheexceptionratherthanthe
norm,asthelicensingofbothmechanicalandperformancelicensesislargelysubjectto
governmentmandate.
Thereissubstantialevidencetosupporttheviewthatgovernmentregulatedlicensing
processesimposedonpublishersandsongwritershaveresultedindepressedrates,at
leastincomparisontononcompulsoryratesforthesameusesonthesoundrecording
side.Settingasideefficiencyconcerns,theOfficedoesnotseeaprincipledreasonwhy
soundrecordingownersarepermittedtonegotiateinteractivestreamingratesdirectly
whilemusicalworkownersarenot.TheOfficeisthereforesympathetictothe
publisherspositionthattheyshouldbepermittedtowithdrawalcertainrightsfromthe
PROstopermitmarketnegotiations.TheOfficebelievesthatpartialwithdrawalinthe
formofalimitedrighttooptoutshouldbemadeavailabletothosewhowantit.
Thisviewisreinforcedbythepossibilityofwholesaledefectionsbymajor(andperhaps
other)publishersfromASCAPandBMIifgovernmentcontrolsarenotrelaxed,andthe
potentialchaosthatwouldlikelyfollow.
Anysuchoptoutprocesswouldneedtobecarefullymanagedtoensurelicenseesdid
notfaceundueburdensinthelicensingprocessasaresult.Atleastfornow,theOffice
believesthatwithdrawalofperformancerightsshouldbelimitedtodigitalrights
equivalenttothosethattherecordlabelsarefreetonegotiateoutsideofsection112and
114essentially,interactivestreamingrightsfornewmediaservices.Inthecaseofsuch
apartialwithdrawal,thepublisherwouldbefreetopursueadirectdealfortherightsin
question(or,ifnotsatisfiedwithalicenseesoffer,withholdsongsfromtheservicein
question).
Publisherswhochosetooptoutwouldneedpubliclytoidentifytheparticularuses
subjecttowithdrawal,thelicensingorganizationfromwhichtheywerebeing
withdrawn,eachoftheaffectedworks,whereadirectlicensemightbesought,andother
pertinentinformation.831Asdiscussedbelow,itistheOfficesrecommendationthata
nonprofitgeneralmusicrightsorganization(GMRO)bedesignatedbytheCopyright
Officetoreceive,maintainandofferaccesstothisinformation.TheOfficeadditionally
proposesthatthecurrentPROsbepermittedtoexpandtobecometobecomemusic
Theproposedoptoutrightwouldbebypublisher,notbyindividualwork.
831
159
U.S.CopyrightOffice
rightsorganizations(MROs)thatwouldbecapableofadministeringnotjust
performancerightsbutmechanicalandperhapsothermusicalworkrightsaswell.832
Whilethepublisherwouldpresumablychoosetobepaiddirectlybythelicenseeunder
anyresultingoutsidelicensingarrangementratherthanthroughanMRO,inorderto
ensuresongwritersconfidenceintheaccountingandpaymentprocess,theOffice
believesthatsongwritersaffiliatedwiththatpublishershouldretaintheoptionof
receivingtheirwritersshareofroyaltiesdirectlyfromthelicenseethroughtheirchosen
MRO.833
Finally,totheextentpublishersfailedtoaffiliatewithanMRO,theirperformancerights
wouldfallunderthedefaultlicensingauthorityoftheGMRO,which,asdescribed
below,wouldcollectroyaltiesanddistributethemtopublisherclaimants.The
combinationofdirectdeals,MROissuedlicenses,andtheGMRObackstopwouldallow
licenseestosecurefulllicensingcoveragefornecessaryperformancerights.
d. Bundled Licensing
Duringthestudy,industrystakeholdersbroadlysupportedincreasedbundlingofrights
tofacilitategreaterlicensingefficiency.Onthesoundrecordingsideoftheequation,
thisdoesnotappeartobemuchofanissue.Totheextentnoninteractiveservices
procurelicensesundersection112and114,theyobtainbothdigitalperformancerights
andthereproductionrights(e.g.,servercopyrights)neededtoengageinthestreaming
process.Whenservicesnegotiatelicensesoutsideofthestatutoryscheme,thelabelsare
freetobundleallnecessaryrightstogether.
Onthemusicalworkside,however,thestoryisdifferent.Licensesforthereproductions
necessarytosupportaninteractivestreamingserviceareissuedundersection115,
whereaslicensesforthestreamedperformancesoftheworksareobtainedfromthe
PROs.In2008,followingalengthyCopyrightOfficeadministrativeproceedingand
industrywidesettlement,theCRBadoptedregulationsthateffectivelyestablishbundled
ratesforvarioustypesofstreamingactivities,underwhichthetotalcostoflicensees
PROperformancelicensesisdeductedfromtheoverallpercentagerateapplicabletothe
relevantserviceundersection115.834Butwhiletheroyaltyrateproblemmayhavebeen
Asdiscussedabove,theconceptofMROswasproposedbyformerRegisterMarybethPetersin
testimonybeforeCongressin2005.Copyright Office Views on Music Licensing Reform Hearingat21
36(statementofMarybethPeters,RegisterofCopyrights).
832
ThisoptioncouldalsohelptoalleviateconcernsaboutthestatusofnonU.S.writersaffiliated
withforeignPROsiftheU.S.publisheroftheirworkschoosestopursuepartialwithdrawal.
833
See MechanicalandDigitalPhonorecordDeliveryRateDeterminationProceeding,74Fed.Reg.
at453132(settingforththeCRBsproposedregulationsthatestablishedtheratesandtermsfor
theuseofmusicalworksinlimiteddownloads,interactivestreamingandincidentaldigital
phonorecorddeliveries);see also CompulsoryLicenseforMakingandDistributingPhonorecords,
834
160
U.S.CopyrightOffice
addressed,aninteractiveservicemuststillobtainseparatemechanicalandperformance
licensesandreportcomplexaccountinginformationunderthesetwodifferentlicensing
regimes(songbysonglicensingundersection115versusblanketlicensingbythe
PROs).
In2005,formerRegisterofCopyrightsMarybethPetersproposedmovingfroma
dualisticapproachforthelicensingofmusicalworksformechanicalandperformance
purposestoasystemofintegratedmusicrightsorganizations,orMROs.835Atthetime
whenmechanicalroyaltiesrepresentedamoresignificantincomestreamthentheydo
todaymusicpublishersandsongwritersexpressedconsiderableskepticismaboutsuch
abundledapproach.836Today,inanerawheremechanicalroyaltiesarebecomingmore
marginal,RegisterPetersproposalappearsprescient,andenjoyssupportamong
publishers,songwritersandnotsurprisinglydigitallicensees.837Itnowseems
apparentthatthegovernmentshouldpursueappropriatechangestoourlegal
frameworktoencouragebundledlicensing,whichcouldeliminateredundantresources
onthepartofbothlicensorsandlicensees.
Astoucheduponabove,themostobviousstepinthisregardwouldbetoallowexisting
musiclicensingorganizationstoexpandtofillthisrolethePROswouldbepermitted
totakeonmechanicallicensing,andmechanicallicensingentitiessuchasHFAorMRI
couldintegrateperformancerightsintotheirbusinesses.Tosatisfyreportingand
paymentobligationsundersongwriterorotheragreementsthatdistinguishbetween
theserights,somesortofallocationofincomeasbetweenthetworightswouldlikelybe
required.ThisperhapscouldbeaddressedbytheCRBinestablishingbundledrates(as
underthesection112and114licenses),orbytheindividualMROsinadministering
negotiatedlicenses.838
IncludingDigitalPhonorecordDeliveries,73Fed.Reg.66,173,66,180(adoptingrulethat
permittedserverandothercopiesnecessarytocertainstreamingprocessestobelicensedunder
section115).
See Copyright Office Views on Music Licensing Reform Hearingat6(statementofMarybethPeters,
RegisterofCopyrights).
835
See, e.g.,id.at62(statementofNMPA)([W]ebelievetheCopyrightOfficeproposalisfatally
flawedandwouldbeharmfultosongwritersandmusicpublishers.).
836
Suchaunifiedlicensingmodelhasbeenineffectfor17yearsintheUnitedKingdom.Our
History,PRSFORMUSIC,http://www.prsformusic.com/aboutus/ourorganisation/ourhistory/Pages/
default.aspx(lastvisitedJan.22,2015).
837
TheU.K.sunifiedlicensingsystemmayprovideahelpfulmodelinthisregard.PRSforMusic
wascreatedbyjoiningtogethertheU.K.PerformingRightSociety(PRS)andtheMechanical
CopyrightProtectionSociety(MCPS).Forroyaltiesreceivedunderitsunifiedlicenses,thePRS
forMusicdistributioncommitteedeterminesvarioussplitsbetweenPRSandMCPSdepending
uponthetypeofuse,whichallocationsaresubjecttoratificationbythePRSandMCPSboards.
838
161
U.S.CopyrightOffice
3. Mechanical Licensing and Section 115

AssalesofCDscontinuetoslipaway,mechanicallicensingrevenuesforthe
reproductionanddistributionofmusicalworksundersection115oncetheprimary
sourceofincomeforpublishersandsongwriterslikewisecontinuetodecline.839
AlthoughsalesofdigitaldownloadsthroughserviceslikeAppleiTuneshavebolstered
mechanicalroyaltiesinrecentyears,evenDPDsaleshavefallenoffwiththeriseof
streamingservicessuchasSpotify.Evenso,mechanicalrevenuesstillcurrently
representabout23%ofincomeformusicalworks(ascomparedto52%generatedby
performances,20%bysynchuses,and5%byotheruses).840Ofthemechanicalshare,a
smallamountisgeneratedbytheserverandotherreproductionsofmusicalworks
requiredforonlineproviderstooperateinteractivestreamingserviceswhich,asnoted
above,alsopayperformanceroyalties.
Commentingpartieshavefocusedontwoprimaryareasofconcernwithrespecttothe
106yearoldcompulsorylicenseembodiedinsection115.Thefirst,putforthbymusic
publishersandsongwriters,isthatthecompulsorylicensedoesnotpermitthemto
controltheuseoftheirworksorseekhigherroyalties.Relatedly,rightsownersalso
complainaboutthelackofanauditrightundersection115andpracticalinabilityto
enforcereportingorpaymentobligationsagainstrecalcitrantlicensees.
Thesecondoverarchingconcernwithrespecttosection115isitssongbysonglicensing
requirement,whichdatesbacktotheoriginalincarnationofthecompulsorylicensein
1909.Songbysonglicensingisviewedbymusicusersasanadministratively
dauntingifnotsisypheantaskinaworldwhereonlineprovidersseeklicensesfor
millionsofworks.
a. Free Market Negotiation Versus Collective Administration

Oneofthemostchallengingissuestoariseinthisstudyhasbeenwhethermusicalwork
ownersshouldbeliberatedfromthesection115compulsorylicensingregime.Citing
PRS Distribution Policy Rules, PRSFORMUSIC,http://www.prsformusic.com/creators/

memberresources/Documents/Distribution%20policy/Distribution%20Policy%20Rules%20as%
20at%20November%202014.pdf(lastvisitedJan.22,2015).Outofthosesplits,100%of
mechanicalroyaltiesarepaidtothepublisher,whileperformanceroyaltiesaresplit50/50
betweenwriterandpublisherunlessanalternatedivisionofroyaltiesisspecified.Music
Registration Policy, PRSFORMUSIC,http://www.prsformusic.com/creators/memberresources/
how_it_works/musicregpolicy/Pages/musicregpolicy.aspx(lastvisitedJan.22,2015).
839
See ASCAPSecondNoticeCommentsat23.
EdChristman,NMPA Puts U.S. Publishing Revenues at $2.2 Billion Annually,BILLBOARD(June

11,2014),http://www.billboard.com/biz/articles/news/publishing/6114215/nmpaputsus
publishing revenuesat22billionannually.
840
162
U.S.CopyrightOffice
thesignificantlyhigherratespaidtosoundrecordingownersforuseswheremusical
workownersareregulatedandsoundrecordingownersarenotandthecontrasting
exampleoftheunregulatedsynchlicensingmarket,whereinmanycaseslicensingfees
areevenlyapportionedmusicpublishersandsongwritershavemadeaconvincing
casethatgovernmentregulationlikelyyieldsratesbelowthosetheywouldenjoyina
freemarket.Motivatedbyconcernssimilartothoseraisedinconnectionwiththe
consentdecrees,manymusicalworkownerswouldliketoseeanendtosection115.
TheOfficewhich,asnoted,believesthatcompulsorylicensingshouldexistonlywhen
clearlyneededtoaddressamarketfailureissympathetictotheseclaims.
Ontheotherhand,incomparisontotherecordindustrywherethreemajorcompanies
canissuelicensesformuchofthemostsoughtaftercontent,withindependentlabels
representingthebalance841U.S.musicalworkownershipismorediffuselydistributed
overagreaternumberofentitiesandselfpublishedsongwriters.842Unlikesound
recordingswhicharetypicallywhollyownedbyanindividuallabelmanymusical
worksarecontrolledbytwo,threeorevenmorepublishers.Notwithstandingthe
defaultrulesofjointcopyrightownership,publishersandsongwritersfrequentlyhave
understandingsthattheyarenotfreetolicenseeachothersrespectiveshares.843And
therearemillionsofmusicalworksinthemarketplace.Spotify,forinstance,reportsthat
itofferssome30millionsongsonitsservice.844
Understandably,asdescribedabove,digitalmusicprovidersareintenselyopposedtoa
systemthatwouldrequireindividuallicensingnegotiationswiththousandsofmusical
workowners.Evenpublisherproponentsoftheproposaltosunsetsection115donot
Althoughthreerecordcompaniesdominate,independentrecordlabelsenhancethemarket
witharichvarietyofcontent,includingwellknownhitrecordings.A2IMFirstNotice
Commentsat1(BillboardMagazine,usingNielsenSoundScandata,identifiedtheIndependent
musiclabelsectoras34.6percentofthemusicindustrysU.S.recordedmusicsalesmarketin
2013.).Manyindependentlabelsarerepresentedbyorganizationsthataggregaterepertoirefor
collectivelicensing,suchastheU.K.basedMerlin,whichissueslicensestodigitalservicessuch
asYouTubeandSpotifyonaglobalbasis.Merlin Strikes Licensing Deal with YouTube,MERLIN(Oct.
19,2011),http://www.merlinnetwork.org/news/post/merlinstrikeslicensingdealwithyoutube.
841
Inrecentyears,aswithrecordedmusic,therehasbeensignificantconsolidationinthemusic
publishingindustry,suchthatthethreemajorpublishersnowrepresentsome63%ofthe
marketapproachingtherecordcompanyfigureof65%.See Christman,FirstQuarter Music
Publishing Rankings: SONGS Surges Again;BruceHoughton,Indie Labels Now Control 34.6% Of U.S.
Market,HypeBot(Jan.16,2014),http://www.hypebot.com/hypebot/2014/01/indielabelsnow
control346ofusmarket.html.
842
See, e.g,PASSMANat30405(explainingthat[t]ruecoadministrationdeals,inwhichall
partiesretaintherighttoadministertheirownshareofacomposition,areamongthemost
commonarrangementsforsongscoownedbypublishersofapproximatelyequalstatus).
843
Information, SPOTIFY,https://press.spotify.com/us/information/(lastvisitedJan.22,2015).
844
163
U.S.CopyrightOffice
denythatitwouldbeextraordinarilydifficultforservicestonegotiatewithmyriad
smallcopyrightownersforallofthemechanicallicensestheyseek,andconcedethat
theremustbesomesortofcollectivesystemtofacilitatelicensingfromsmaller
rightsowners.845Butapartfromtheoptimisticviewthatshouldsection115beretired,
newentitieswillspringforthtomeetthisneed,thereislittledetailconcerninghowa
collectivesolutionwouldreliablybeimplemented.
Thedifficulty,then,ishowtoreconcilethecompetingvaluesoffreemarketnegotiation
andcollectivemanagementofrights.Eachrepresentsanexpressgoalofreform:fair
compensationtocreators,ontheonehand,andlicensingefficiency,ontheother.A
middlepathmayprovidethebestanswer.
Publisher OptOut Right
TheOfficebelievesthatratherthaneliminatingsection115altogether,section115
shouldinsteadbecomethebasisofamoreflexiblecollectivelicensingsystemthatwill
presumptivelycoverallmechanicalusesexcepttotheextentindividualrightsowners
choosetooptout.Atleastinitially,themechanicaloptoutrightwouldextendtothe
usesthatcouldbewithdrawnfromblanketperformancelicensesthatis,tointeractive
streamingrightsand,inaddition,todownloadingactivities846(which,byjudicial
interpretation,donotimplicatethepublicperformanceright847).Toreiterate,theseare
useswheresoundrecordingownersoperateinthefreemarketbutpublishersdonot.848
IPACFirstNoticeCommentsat6(Ownersofmusicalworksaresympathetictothoseentities
thatneedanefficientprocessbywhichtoobtainlicensesformusicalworks.Inthatregard,IPAC
supportsthecreationofoneormorelicensingagenciestonegotiatefairmarketlicenseratesand
grantlicensesonbehalfofthecopyrightownersofthemusicalworksonablanketlicenseor
individualsongbasis.);NMPAFirstNoticeCommentsat18(Compulsorylicensingisnot
neededtoachievetheefficiencyofbundledlicenses...theonlythingstoppingperformance
rightsorganizationssuchasASCAPandBMIfromofferingabundleofreproduction,
performance,anddistributionrightsfromsongwriters/publisherswillingtoappointthemas
theiragentsforsuchrightsareoutdatedconsentdecrees.).
845
Thecategoryofdownloadsincludesbothpermanentdownloadsandlimiteddownloads.
Whilepermanentdownloadsareavailabletothepurchaserindefinitely,limiteddownloadscan
beaccessedforonlyalimitedperiodoftimeorlimitednumberofplays.37C.F.R.385.11.
Downloadusesalsoincluderingtones,forwhichaseparateratehasbeenestablishedunder
section115.37C.F.R.385.3;see also MechanicalandDigitalPhonorecordDeliveryRate
AdjustmentProceeding,71Fed.Reg.at64,316(settingforththeCopyrightOffices2006
MemorandumOpinionconcludingringtonesqualifyasDPDs).
846
SeeUnited States v. ASCAP,627F.3d64,68(2d.Cir.2010)(holdingthatdownloadingadigital

musicfileovertheinternetdoesnotconstituteapublicperformanceoftheworkembodiedin
thatfile);In re Cellco Partnership,663F.Supp.2d363,374(S.D.N.Y.2009)(holdingthat
downloadingaringtonetoacellularphonedoesnotinandofitselfconstituteapublic
performanceofamusicalwork).Alsonotethatmusicalworkownersdonotcollectmechanical
847
164
U.S.CopyrightOffice
Full Market Coverage

AsenvisionedbytheOffice,thecollectivesystemwouldcompriseMROs(asnoted,with
theabilitytorepresentbothperformanceandmechanicalrights)actingonbehalfoftheir
respectivepublishermembers;individualpublishers(includingselfpublished
songwriters)representingtheirownmechanicallicensinginterestswhohadexercised
theiroptoutright;andtheGMRO.Unlesstheyhadadirectdealinplace,publishers
wouldbepaidthroughtheirchosenMRO.TheGMROwouldcollectforworks(or
sharesofworks)notcoveredbyadirectdealorrepresentedbyanMROincluding
workswithunknownownersandattempttolocateandpaytherelevantrightsholders.
LicenseescouldthusachieveendtoendcoveragethroughthecombinationofMROs,
directlicensors,andtheGMRO.
Asinthecaseofthoseseekingtowithdrawspecificperformanceusesfrommandatory
licensing,publisherswhowishedtooptoutfromoneormoreofthecategoriesof
mechanicallicensingwouldneedtoidentifytheusesinquestionandprovidethis
information(viatheirMROifapplicable)totheGMRO,alongwithidentificationoftheir
works,licensingcontactinformation,andotherrelevantdata.849Theywouldthenbe
freetonegotiatedirectlywith,andbepaiddirectlyby,thelicensee.850Absentprovision
ofanoticethatthepublisherwasexercisingitsrighttooptout,thatpublishersworks
wouldbelicensedthroughitsMRO.851
royaltiesfornoninteractivestreamingusessubjecttosection112and114statutorylicensing. See
NMPAFirstNoticeCommentsat24;MechanicalandDigitalPhonorecordDeliveryRate
DeterminationProceeding,74Fed.Reg.at4513.
Althoughphysicalproducts,suchasCDsandvinylrecords,alsofallintothiscategory,
stakeholderconcernshavefocusedfarlessonthephysicalmarketplace,which(despitearecent
increaseinthenichemarketofvinylrecords)continuestodecline.Asnotedabove,theOffice
believesthatthequestionofoptoutrightsforphysicalproductcouldbedeferredforfuture
consideration.
848
Asnotedabove,atleastforthetimebeing,theOfficebelievesthatoptoutrightsforpublishers
shouldbebypublisher,notbyindividualwork.Thus,optoutpublisherswouldberesponsible
fortheirentirecatalog.
849
Incontrasttoperformancerights,songwriteragreementsdonotassumethatthewritersshare
ofmechanicalroyaltieswillflowthroughaPRO.Accordingly,whileitmaybeamatterworthy
offurtherdiscussion,theOfficeisnotnowsuggestingthatsongwritersshouldhavetherightto
redirecttheirmechanicalsharesthroughachosenMRO.
850
Somepublisherscouldoptoutonlytofindthatthelicenseedeclinedtopursueindividual
negotiationswiththem.Forthisreason,itseemsitwouldbeusefultohavesomesortof
mechanismforsucharightsownertoreverseitsoptoutandreturntothecollectivesystemifit
wished.
851
165
U.S.CopyrightOffice
Cover Recordings
Section115permitsdigitalservicesandotherstoreproduceanddistributecopiesof
musicalworksembodiedinexistingrecordings,providedthattheuserisalso
authorizedtousetherecording.852Anotherdimensionofsection115isthatitcanbe
usedforpermissiontomakenew,coverrecordingsofsongs,solongasthenew
versiondoesnotchangethebasicmelodyorfundamentalcharacterofthework.853
Whiletheabilitytomakeacoverrecordinghaslongbeenafeatureofthelaw,itisnot
withoutcontroversy,especiallyamongrecordingartistswhowritetheirownworks.
Whilesomeartistsongwritersmayviewimitationasflattery,othersdonotappreciate
thattheyareunabletopreventthererecordingoftheirsongsbyothers.Manymusic
creatorsseekmorecontrolovertheirworks.Assomeartistsseeit,[a]pprovalisbyfar
themostimportantrightthatanartistpossesses.854
Withrespecttocoverrecordings,theOfficerecommendsanapproachwherebythose
whoseektorerecordsongscouldstillobtainalicensetodoso,includinginphysical
formats.Butthedisseminationofsuchrecordingsforinteractivenewmediauses,as
wellasintheformofdownloads,wouldbesubjecttothepublishersabilitytooptoutof
thecompulsoryregime.Thus,apublisherschoicetonegotiateinteractivestreaming
andDPDrightsforitscatalogofsongswouldincludetheabilitytoauthorizethe
disseminationofcoverrecordingsbythosemeans.Or,putanotherway,wherethe
17U.S.C.115(a)(1).
852
Id.115(a)(2).
853
See, e.g.,DinaLaPoltandStevenTyler,CommentsSubmittedtotheDepartmentof
CommercesGreenPaperonCopyrightPolicy,Creativity,andInnovationintheDigital
Economy,at2(Feb.10,2014),available at http://www.uspto.gov/ip/global/copyrights/lapolt_and_
tyler_comment_paper_021014.pdf(objectingtoacompulsoryremixlicense).Thisperspective
wasvoicedbyanumberofprominentartistsinresponsetoasuggestiontoconsideranew
licensingframeworkforremixesthathasbeenputforthbyUSPTOandNTIAaspartofthe
GreenPaperprocessoftheInternetPolicyTaskForce.See GREENPAPER;SteveKnopper,Don
Henley, Steven Tyler Condemn Potential Copyright Law Change, ROLLINGSTONE(Feb.13,2014),
http://www.rollingstone.com/music/news/donhenleysteventylercondemnpotentialcopyright
lawchange20140213.TheGreenPapersuggestionmotivatedbyadesiretofacilitatethereuse
ofcreativeworkswouldextendtomusic.See GREENPAPERat2829(citingconcernsabout
musicsampling).VariouscommentersaddressedtheGreenPapersuggestionintheircomments
totheCopyrightOffice.BecauseitisnotaCopyrightOfficeinitiative,thisreportdoesnot
addresstheremixissueotherthantonotethat,basedonthecommentssubmittedtotheOffice,it
appearstohavedrawnoppositionwithinthemusiccommunity.See, e.g.,CCCSecondNotice
Commentsat3;LaPoltFirstNoticeCommentsat15;NMPA&HFASecondNoticeCommentsat
3738.But seeMenellFirstNoticeCommentsat3(advocatingforthecreationofacompulsory
licenseforremixes).TheOfficehopesthatthisreportwillproveusefultotheUSPTOandNTIA
intheirevaluationoftheremixissueasitrelatestomusic.
854
166
U.S.CopyrightOffice
publisherhadoptedout,someonewhoproducedacoverrecordingwouldneedto
obtainavoluntarylicensetopostthesongonaninteractivestreamingordownload
service(justaswouldsomeonewhowishedtoofferstreamsordownloadsofthe
originalrecordingofthatwork).
Audiovisual Uses
Intheircomments,therecordcompaniesexplainthatbecauseconsumersnowaccess
musiconcomputers,phonesandotherdeviceswithscreens,theyexpecttosee
somethingwhenasongisplayingwhetheritisavideo,albumcover,orlyrics.The
labelsobservationcorrespondstothefactthatformusicfansoftoday,YouTubewitha
billionusersamonthisthelargestserviceintermsoflisteningtomusic.855
Therecordcompaniesurgethatthelicensingsystemformusicalworksneedstobe
updatedtorespondtotheconsumerdesireformoreandmoreinnovative
audiovisualcontent.Toillustratethepoint,thelabelscitearecentrecordrelease
involvingavarietyofdistinctconsumerproductsthatnecessitatedover1,400
individuallicenses.856
Thecombinationofmusicwithvisualcontentrequiresasynchronizationlicenseand
synchrightsarenotsubjecttogovernmentoversight.Section115islimitedtoaudio
onlyusesofmusicalworks.Whilenotproposingaspecificapproach,thelabelswould
liketoseesection115replacedwithanupdatedblanketsystemthatwouldextendto
consumeraudiovisualproducts.857Intheirview,suchachangewouldfacilitatemany
commonsynchtransactions,suchasthelicensingofmusicvideostoonlineservicesand
incorporationofmusicinuserpostedvideos.
Intheeyesofmusicpublishersandsongwriters,however,thelabelssuggestion
representsadramaticandunacceptableexpansionofthecompulsorysystem.This
reactionisperhapsnotterriblysurprisinginlightofthepublisherspresentdesireto
phaseoutmandatoryaudioonlylicensingundersection115.858
Tr.at155:1617(June4,2014)(StevenMarks,RIAA);see also GlennChapman,YouTube debuts

subscription music service,YAHOONEWS(Nov.12,2014)http://news.yahoo.com/youtubedebuts
subscriptionmusicvideo190223540.html(YouTubeistheworldsbiggestonlinesourceoffree
streamingmusicandthesitehasaboutabillionusersamonth.).
855
RIAAFirstNoticeCommentsat10(Therecordcompanyresponsibleforonecurrent,
successfulreleaseobtained1481licensesfortheproject.).
856
Thelabelsarenotproposingtoextendanysynchlicensingsolutiontousesinthirdparty
createdproduct[s],suchasinadvertisementsandtelevision,whichhavealwaysrequired
individualizednegotiationswithbothlabelsandpublishers.See id.at17.
857
See NMPASecondNoticeCommentsat3233(TheRIAArationalizesthisapproachby
claimingatotalabdicationofapprovalrightsbymusicalworkownerscombinedwithexpanding
858
167
U.S.CopyrightOffice
TheOfficeissympathetictothelabelsconcerns,butcannotatthistimerecommendthat
consumersynchusesbeincorporatedintoagovernmentsupervisedlicensingregime.
Asmaybeapparentfrommuchoftheforegoingdiscussion,onceacompulsorylicense
isimplementeditbecomesdeeplyembeddedinindustrypracticesandevenwhenits
originalrationaleislostintimeisdifficulttoundo.Thataloneshouldcounselcaution
inallbutthemostmanifestinstancesofmarketfailure.
Here,theOfficedoesnotobservesuchafailureandbelievesthereisevensomereason
tobeoptimisticaboutprivatemarketsolutions.First,inthecaseofnewreleases,the
labelspresumablyhavesomeability(andleverage)toworkthroughaudiovisual
licensingissuesbyvirtueoftheirrolewithrespecttothecreationofmusicvideos,
albumart,etc.Notably,intheRIAAsownexampleofasinglealbumproject
requiringoverathousandlicenses,itseemsthatlicenseswereobtained.859
Additionally,overthelastdecade,labelsandpublishershaveenteredintoaseriesof
NDMAstofacilitatethelabelslicensingofmusicvideosandotherproductsfrommusic
publishers.860Andinanothersignificantdevelopment,YouTube,hasdevelopedarobust
licensingprogramandenteredintovoluntaryagreementsthatenablelargeandsmall
labelsandpublisherstoclaimandmonetizetheircontent.861Takentogether,these
thescopeofformatsauthorizedunderSec.115wouldpromotegreaterefficiencyandwould
simplifythemusiclicensingprocess.WithanOrwellianspin,theypromotetheideathatmusical
workownerswouldbeenrichediftheyare,ultimately,disempoweredinthedigitalmusic
marketplace.);NSAISecondNoticeCommentsat8(Whiletheconceptofamoreefficient
licensingsystemissomethingeveryoneagreeson,theRIAAproposalwouldbasicallyeliminate
theabilityofmusicpublishersorselfpublishedsongwritersandcomposerstoinitiateordirectly
negotiatetheirownagreements.).Interestingly,justafewyearsago,thepublisherswereofa
somewhatdifferentmindset,withNMPAadvocatingforablanketstylelicensetocoversynch
usesbyYouTubeandsimilarservices:Ifwedont...figureoutawaytodomass
synchronizations,wearegoingtomissoutonmanybusinessopportunitiesthatcouldprovide
solutionstothedecliningfortunesofthewholemusicindustry.DavidIsraelite,David Israelite,
NMPA Presidents Guest Post: Why Music Publishers Must Adopt Blanket Licensing,BILLBOARD(June
24,2011),http://www.billboard.com/biz/articles/news/publishing/1177339/davidisraelitenmpa
presidentsguestpostwhymusicpublishers.
RIAAFirstNoticeCommentsat6,10.
859
Forexample,in2012NMPAnegotiatedalicensingframeworkwithUMGtopermit
independentpublisherstograntUMGthesynchrightsnecessarytostreamvideoscontaining
theirworksonVEVOandYouTube.See NMPASecondNoticeCommentsat33;Butler,
UMG/NMPA Broker Model License Agreement;Christman,NMPA Inks Deal With Universal Music
Group Over VEVO, YouTube Videos.
860
Inthisregard,however,itisworthnotingthatindependentpublishershadtopursuean
infringementactionagainstYouTubebeforeYouTubepresentedthemwithalicensingofferunder
861
168
U.S.CopyrightOffice
examplessuggestthatthemarketappearstoberespondingtotheneedforlicensingof
audiovisualusesbyconsumersandthatthereisprobablynopressingneedfor
governmentintervention.
b. Shift to Blanket Licensing

Regardlessofitsscopeorwhetheritincludesanoptoutright,theOfficebelievesthat
section115shouldbeupdatedtobettermeettheneedsofthedigitalage.Congress
attemptedtodothisin2006withtheproposedSIRAlegislation,whichwouldhave
createdablanketmechanicallicensefordigitaluses.Althoughthatbillgotasfaras
passingtherelevantHousesubcommittee,862itfacedadegreeofresistancefromcertain
industryparticipantsandultimatelyfoundered.
Basedonstakeholderssentiments,howeverespeciallythoseofthedigitalservices
thetimeseemsripetorevisittheconceptofblanketmechanicallicensing.Usershave
madeastrongcaseinpointingouttheinefficienciesofasystemthatrequiresmultiple
licenseestoascertainsongbysonglicensinginformationandmaintainitinredundant
databases.Atthesametime,theyhaverepeatedlyexpressedawillingnesstopay
royaltiesincaseswheretheyareunabletotrackdownlicensinginformationfor
particularsongsinordertomitigatetheirpotentialliabilityforunmatchedworks.863
asettlementnegotiatedbyNMPA.See Football Assn Premier League v. YouTube,633F.Supp.2d

159.
See SIRA,H.R.5553.In2006,theHouseJudiciaryCommitteesSubcommitteeonCourts,the
Internet,andIntellectualPropertyforwardedSIRAtothefullJudiciaryCommitteebyunanimous
voicevote.SeeH.R. 5553,CONGRESS.GOV(June8,2006),https://www.congress.gov/bill/109th
congress/housebill/5553.
862
Notably,section115has,sinceitsinception,providedamechanismtofileanoticeofintentto
useamusicalworkwiththeCopyrightOfficeiftheowneroftheworkcannotbefoundin
CopyrightOfficerecords.See 17U.S.C.115(b)(1).Undersection115,noroyaltiesarerequired
tobecollectedbytheOfficeinconnectionwiththesefilings.See id. ItistheOffices
understanding,however,thatthisprovisiondoeslittletoameliorateconcernsofdigitalservices
inlightofthefilingfeesthattheOfficemustchargetoadministersuchsongbysongnotices,
whichmaynumberinthethousandsorperhapseventhemillionsforalargeservice.See DiMA
FirstNoticeCommentsat20([T]otheextentthataservicechoosestofilestatutorylicense
noticeswiththeCopyrightOfficeforthemanymusicalworksforwhichtherelevant
rightsownerscannotbeidentified,thecostscanbeoverwhelminggiventhevolumeofworksat
issue.).Underitscurrentfeeschedule,theOfficechargesafeeof$75foranoticeofintention
coveringasingletitle,andfornoticesincorporatingadditionaltitles,afeeof$20per10additional
titlessubmittedonpaper,and$10per100additionaltitlessubmittedelectronically.37C.F.R.
201.3(e).Moreover,duetoITconstraintswithintheLibraryofCongress,theOfficeisstillnot
abletoacceptsuchsubmissionsinbulkelectronicform.
863
169
U.S.CopyrightOffice
Butwhileconsiderablymoreuserfriendlyforlicensees,blanketlicensingcannotbe
viewedasapanacea.Itdoesnotcuretheproblemofbadormissingdata,orthe
inabilitytomatchsoundrecordingswiththemusicalworkstheyembody.Inany
situationwherealicensedtransactiontakesplace,inorderforaroyaltytobepaidtothe
rightsowner,theremustbealinkbetweentheworkusedandtheownerofthatwork.
Especiallyinthecaseoflesserknownworks,itcanbechallengingtomatchasound
recordingwiththemusicalworkitembodies,andthatmusicalworktoitsowner.
Today,undersection115,theburdenofidentifyingthesonganditsownersisonthe
licensee(orsometimesathirdpartyagentretainedbythelicensee);thelinkismadein
thesongspecificlicensethatissues.Blanketlicensingmerelykicksthisresponsibility
obligationdowntheroadforanotheractortoaddress.Underablanketsystem,the
obligationtomakethematchbetweentheexploitedworkanditsownerfallsonthe
licensingorganizationforexample,thePROwhichmustidentifytheuseandconnect
ittotheowner.
Nonetheless,theOfficebelievesthatonthewhole,thebenefitsofablanketlicensing
approachclearlyoutweightheconcededchallengesofmatchingreporteduseswith
copyrightowners.Throughoutthisstudy,theOfficehasheardconsistentpraiseforthe
efficienciesofblanketlicensingbySoundExchangeandthePROs,andwidespread
frustrationwiththesongbysongprocessrequiredundersection115includingfrom
publisherswhofindthemselvesburdenedwithdeficientnoticesandaccountings.
Ultimately,itisintheinterestofmusicownersaswellaslicenseestoimprovethe
licensingprocesssoitisnotanobstacleforpayingservices.Tofurtherfacilitatethe
rightsclearanceprocessandeliminateuserconcernsaboutliabilitytounknown
rightsowners,theOfficebelievesthatmechanicallicensing,likeperformancelicensing,
shouldbeofferedonablanketbasisbythosethatadministerit.Thiswouldmeanthata
licenseewouldneedonlytofileasinglenoticetoobtainarepertoirewideperformance
andmechanicallicensefromaparticularlicensingentity.Songbysonglicensingis
widelyperceivedasadauntingrequirementfornewservicesandanadministrative
dragonthelicensingsystemasawhole.Themovetoablanketsystemwouldallow
marketplaceentrantstolaunchtheirservicesandbeginpayingroyaltiesmore
quickly.
c. Ratesetting
Asexplainedabove,theOfficesupportsintegrationofmechanicalwithperformance
rightsadministrationtosimplifythelicensingprocess,especiallywherebothrightsare
implicated,asinthecaseofinteractivestreaming.864Evenifbothrightsarenot
Althoughpublisherstraditionallyhavenotsoughtroyaltiesfortheserverandother
reproductionsnecessarytofacilitatenoninteractivestreaming,itwouldprobablybehelpfulto
clarifythelawtoprovidethatanynecessarymechanicalrightswerecoveredaspartofabundled
864
170
U.S.CopyrightOffice
implicatedasinthecaseofDPDlicensingitwouldstillappeartomakesenseto
combinelicensingresourcesintounifiedMROs,especiallyinaworldofdeclining
mechanicals.Inordertoreaptherewardsofamoreunifiedlicensingstructure,the
Officefurtherrecommendsthattheratesettingproceduresformechanicaland
performancealsobecombined.
AsNeeded Ratesetting
TheCRBestablishesmechanicalratesforthevariouscategoriesofusethatfallunder
section115.865TheOfficebelievesthisresponsibilityshouldcontinue,thoughwithan
importantmodification:asisnowthecasewithperformancerights,ratherthanestablish
ratesacrosstheboardeveryfiveyears,theCRBshouldsetratesforparticularusesonly
onanasneededbasiswhenanMROandlicenseeareunsuccessfulinreaching
agreement.
Therearecurrently17distinctratecategoriesunderthesection115license,866eachwith
itsownspecificrate.UnderthecurrentCRBregime,thepartiesarerequiredtoidentify
attheoutsetoftheratesettingproceedingeverybusinessmodelthatmayberelevantin
thenextfiveyearssothataratecanbeestablishedforthatuse.Asdigitalbusiness
modelsproliferate,sodotherates.Thedeterminationofgovernmentratesfora
plethoraofspecificdistributionmodelswouldseemtobeaninefficientwaytogoabout
theratesettingprocess.Inthefirstplace,newdigitalmodelsspringupeveryday,soitis
impossibletokeepupwiththechangingmarketplaceprospectively.Inaddition,many
oftheratesrequiredtobeincludedinaglobalratesettingprocessmightbeeasilyagreed
bythepartieswithouttheneedforgovernmentinterventionespeciallyinthecaseof
usesthatarelesseconomicallysignificant.
license.Cf. CompulsoryLicenseforMakingandDistributingPhonorecords,IncludingDigital
PhonorecordDeliveries,73Fed.Reg.at66,18081([I]fphonorecordsaredeliveredbya
transmissionservice,thenunderthelastsentenceof115(d)itisirrelevantwhetherthe
transmissionthatcreatedthephonorecordsisinteractiveornoninteractive.).
Asection115licenseisonlyavailableafterphonorecordsoftheworkinquestionhavefirst
beendistributedtothepublicintheUnitedStatesundertheauthorityofthecopyrightowner.17
U.S.C.115(a)(1).TheOfficeisnotrecommendinganychangetothisaspectofthestatutory
system,whichpermitsmusicalworkownerstocontrolthesocalledfirstuse(orinitial
recording)oftheirworks.
865
Thesecategoriesinclude:physicalphonorecordsandpermanentdigitaldownloads(see 37
C.F.R.385.3(a));ringtones(see37C.F.R.385.3(b));fivecompensationmodelsforservices
offeringinteractivestreamsandlimiteddownloads(see 37C.F.R.385.13(a));threetypesof
promotionalactivitiesinvolvinginteractivestreamsandlimiteddownloads(see 37C.F.R.
385.14(b)(d));mixedservicebundles,musicbundles,limitedofferings,paidlockerservices,and
purchasedcontentlockerservices(see 37C.F.R.385.23(a));andfreetrialperiodsforcertain
serviceofferings(see 37C.F.R.385.24).
866
171
U.S.CopyrightOffice
UndertheOfficesapproach,theCRBwouldbecalledupontosetarateonlyinthecase
ofanimpassebetweentwoparties.ButtoborrowfromtheexistingCRBsystem,other
interestedparties(suchasotherMROsandotherusers)couldchoosetojointherelevant
proceeding,inwhichcasethosepartieswouldbeboundbytheCRBdeterminedrate
(exceptforpublishersoptingoutoftheMROfortheuseinquestion.867)
Use of Benchmarks
Throughoutthestudy,therehasbeensignificantdebateconcerningtheratesetting
standardthatshouldbeemployedbytheCRBsomesupportingsection801(b)(1)s
fourfactortestthatappliestosatelliteradioandpreexistingsubscriptionservicesunder
section114,aswellasmechanicalusesundersection115,whileothersfavorthewilling
buyer/willingsellerstandardthatgovernsinternetradio.Asdiscussedabovein
connectionwiththeissueoflicensingparity,theOfficebelievesthatallmusicusers
shouldoperateunderacommonstandard,andthatstandardshouldaimtoachieve
marketratestothegreatestextentpossible.
ButregardlessoftheratestandardinvokedbytheCRB(orforthatmatter,aratecourt),
acriticalaspectoftheratesettinganalysisiscomparisonoftherequestedrateswith
relevantmarketbenchmarks,totheextenttheyexist.Inthecaseofcompulsory
licensing,thisisanelusiveenterprise,sincetherearenofreelynegotiatedlicensesto
informthetribunal.
Asnotedabove,theOfficebelievesthatallpotentiallyinformativebenchmarksshould
bereviewedandevaluatedintheratesettingprocess.Anadvantageoftheproposed
optoutsystemisthattherewouldbeagreaterlikelihoodthatactualmarket
benchmarkswouldexisttoinformtheratesettingtribunal.Evenwhereratesremain
subjecttogovernmentoversight,theOfficebelievesthatcopyrightpolicyand
specificallythedesiretofairlycompensatecreatorswillbebetterservedbyagreater
opportunitytoestablishrateswithreferencetorealmarkettransactions.868
Section115alreadyrecognizesthatavoluntaryagreementcansupersedethestatutoryrate.17
U.S.C.115(c)(3)(E)(i).Asapracticalmatter,however,whilevoluntaryratesforusessubjectto
mandatorylicensingmaybelower,theywillnotexceedthestatutorilyfixedratebecausetheuser
mayalwaysresorttothecompulsoryprocess.
867
Ofcourse,thiswastheconceptpursuedbythepublisherswhowithdrewfromASCAPand
BMItonegotiateseparaterateswithPandora.There,asexplainedabove,thecourtrejectedtwo
oftheprofferedbenchmarksduetowhatitviewedascoerciveconductonthepartofthe
publishersinthenegotiationprocess.TheCRB,too,isfreetorejectbenchmarksthatitperceives
tobeunreasonableorotherwisewithoutmerit.Music Choice v. Copyright Royalty Board,Nos.13
1174,131183,2014WL7234800,at*7(D.C.Cir.Dec.19,2014)(The[CRJs]werewithintheir
broaddiscretiontodiscount[SoundExchangesproposed]benchmarksandlookelsewherefor
guidance,astheCRJsmandatetoissuedeterminations...doesnothamstringtheJudges
whenneitherpartyproposesreasonableorcomparablebenchmarks.).Copyrightownerswould
868
172
U.S.CopyrightOffice
Interim Rates
Thereisnocurrentprocessforestablishinganinterimrateunderthesection115license.
Aswithperformancerights,theOfficebelievesthereshouldbeasimpleandexpeditious
procedureavailabletohavetheCRBestablishatemporarymechanicalrateforanew
userpendingfinalresolutionoftheapplicableroyaltybyagreementofthepartiesor
througharatesettingproceeding.
d. Audit Right
Publishersandsongwritershavelongcomplainedaboutthelackofanauditrightunder
section115.869Inadditiontomonthlystatementsofuse,thestatuteprovidesthateach
licenseemustprovidetothecopyrightowneracumulativeannualstatementthatis
certifiedbyaCPA.870Butsection115confersnoexpressrightforacopyrightownerto
auditalicenseesstatements.871
Althoughsection114doesnotincludesuchanexpressauditright,itdoesprovidethat
theCRBshallestablishrequirementsbywhichcopyrightownersmayreceive
reasonablenoticeoftheuseoftheirsoundrecordingsunder[section114],andunder
whichrecordsofsuchuseshallbekeptandmadeavailablebyentitiesperforming
soundrecordings.872Basedonthisauthority,theCRBhaspromulgatedregulationsto
permitauditsofroyaltypaymentsofstatutorylicenseesbySoundExchange.873Notably,
thereisparallellanguageinsection115,thoughitislimitedtoreportinginconnection
withthemakingofDPDs,andnoequivalentroyaltyverificationruleshavebeen
promulgatedbytheCRBunderthatprovision.874
Regardlessofanyotherpotentialadjustmentstosection115,theOfficebelievesthatthe
mechanicallicensingsystemshouldbeamendedtoprovideforanexpressauditright
ofcourseneedtoensurethattheyproceededcarefullyandindependentlyintheirdealingswith
licenseessoasnottounderminethevalueoftheiragreementsforratesettingpurposes.
869
See, e.g., CastleFirstNoticeCommentsat23;NMPA&HFAFirstNoticeCommentsat1415.
Inanotabledeparturefromthetermsofsection115,HFA,whichlicensesmechanicalrightson
behalfofnumerouspublishers,doesnotrelyuponthesubmissionofcertifiedannualstatements
butinsteadconductsroyaltyexaminationsofsignificantlicenseestoverifytheirpayments.
870
Bycontrast,thesection111and119cableandsatellitecompulsorylicenses,aswellasthe
AudioHomeRecordingAct(AHRA),provideforaroyaltyverificationprocessforthebenefitof
copyrightowners.See 17U.S.C.111(d)(6)(cablelicensees);119(b)(2)(satellitelicensees);
1003(c)(2)(manufacturersofdigitalaudiorecordingdevicesandmedia).
871
17U.S.C.114(f)(4)(A).
872
37C.F.R.380.6,380.15,380.25.
873
17U.S.C.115(c)(3)(D).
874
173
U.S.CopyrightOffice
coveringthefullrangeofusesundersection115,withtheparticularlogisticsofthe
auditprocesstobeimplementedbyregulation.875
TheOfficewasnotmadeawareduringthestudyofanyauditissueinrelationtothe
PROs.876ButtheOfficenotesthatinanyupdatedsystem,itwouldbecriticalfor
copyrightownerstobeabletoverifynotjustmechanicalroyaltiesbutperformance
incomeaswell(whichcouldbecombinedunderabundledlicense).Auditactivities
couldperhapsbecoordinatedthroughtheGMRO;onceanauditwasnoticedbyone
MRO,otherscouldchoosetoparticipateintheauditprocess,sharinginitscostsandany
recovery.877Thistypeofcoordinatedauditprocesshasbeenimplementedunderthe
cableandsatellitelicensesaswellasundertheAHRA.878
e. Sunset of Existing Section 115 Licenses

PROlicensestypicallyhaveaninitialtermofuptofiveyears.879Alicenseemay
thereforeneedtorenegotiateitslicensewithoneormorePROseveryseveralyears.For
thisreason,whilespecificdetailswouldundoubtedlyneedtobeaddressed,existing
InlightoftheOfficesprimaryresponsibilityundertheexistingsection115frameworkfor
determiningtherequirementsforstatementsofaccount,itmaybesensibletoassignrulemaking
responsibilityforauditsofthesestatementstotheOfficeratherthantheCRB.See 17U.S.C.
115(c)(5);17U.S.C.803(c)(3)(CRBsmayspecifyrecordkeepingrequirementsaspartofa
ratesettingdetermination);see also DivisionofAuthorityBetweentheCopyrightRoyaltyJudges
andtheRegisterofCopyrightsundertheSection115StatutoryLicense,73Fed.Reg.48,396(Aug.
19,2008)(explainingresponsibilitiesoftheOfficeversustheCRBinthisarea).
875
Itappearsthatcurrently,PROsdonothaveanysignificantauditrights,compellingthemto
acceptpaymentsatbesteffortlevelsandfacevalue,butnotnecessarilyaccurate.Derek
Crownover,Small Music Publishers Face Uphill Battle,THETENNESSEAN(Aug.14,2014),
http://www.tennessean.com/story/money/industries/music/2014/08/15/smallmusicpublishers
faceuphillbattle/14075783/.Infact,theASCAPconsentdecreemerelysuggeststhatASCAP
mayrequireits...licenseestoprovideASCAPwithallinformationreasonablynecessaryto
administertheperprogramorpersegmentlicense,whiletheBMIconsentdecreehasnosuch
requirement.ASCAPConsentDecreeVIII.C;BMIConsentDecree.
876
Publisherswhohadnegotiateddirectlicenseswithdigitalproviderswouldberesponsiblefor
managingtheirownauditsinkeepingwiththeirindividualcontracts.
877
See 37C.F.R.201.30(settingforththeprocedureforverificationofstatementsofaccount
submittedbycableoperatorsandsatellitecarriers).
878
See ASCAPConsentDecreeIV.D(ASCAPisprohibitedfrom[g]rantinganylicensetoany
musicuserforrightsofpublicperformanceinexcessoffiveyearsduration.).Thisrestrictionis
notfoundintheBMIConsentDecree,althoughtheOfficeunderstandsthatBMIslicensing
practicestendtotrackASCAPsinthisregard,perhapsduetothefactthattheDOJoftentakes
theviewthatBMIandASCAPshouldoperateundersimilarrules.BMIFirstNoticeComments
at16.ItistheOfficesfurtherunderstandingthatsuchlicensesmaybesubjecttoautomatic
extensionsunlessterminatedbyeitherthePROorlicensee.
879
174
U.S.CopyrightOffice
PROlicenseswouldnotappeartopresentanobstacletoimplementingthechanges
proposedhere.Alicensegrantedundersection115,ontheotherhand,doesnothavean
enddate.Aquestionthereforearisesastohowthemillionsofexistingsection115
licenseswouldberetired.
TheOfficebelievesthereisananswertothisquestionas,apparently,dothedigital
companieswhohaveadvocatedforanewblanketsystem(aswellasthepublishersthat
haveadvocatedforanendtosection115altogether).Significantly,theratesandterms
inasection115licensedonotcontinueinperpetuitybutinsteadareadjustedeveryfive
yearsinaccordancewiththeCRBsstatutoryschedule.880Thus,therecanbeno
expectationonthepartofalicenseethatparticularratesortermswillcontinuebeyond
thefiveyearstatutoryperiod.
Insunsettingthesongbysonglicensingsystem,therewouldneedtobeaperiodof
transition,ofcourse,duringwhichtheuserwouldapplyforlicensesfromtheseveral
MROs.Assuming,however,thatthatperiodoftransitionweretiedtothethen
applicablerateperiod,thechangeovershouldnotharmanylegitimateexpectation
concerningrates.
4. Section 112 and 114 Licenses

Oneofthefewthingsthatseemstobeworkingreasonablywellinourlicensingsystem
isthestatutorylicenseregimeundersections112and114,whichpermitsqualifying
digitalservicestoengageinnoninteractivestreamingactivitiesataCRBdetermined(or
otherwiseagreed)rate.Thesection112and114licensesadministeredby
SoundExchange,anonprofitentitydesignatedbytheCRBcoverbothinternetand
satelliteradioprovidersandcertainsubscriptionmusicservices.Althoughthediffering
ratesettingstandardsfortheselicensesaswellassomeoftheratesestablishedunder
thosestandardshavebeenasourceofcontroversy,fromtherecordinthisstudy,the
licensingframeworkitselfisgenerallywellregarded.
Recordingartists,aswellasbackupmusiciansandvocalists,appreciatethefactthatthey
arepaidtheirrespectivesharesofroyaltiesfordigitalperformancesunderthestatutory
formulaadministeredbySoundExchange.881SoundExchangedeductsamodest
Notably,becauseHFAlicensesincorporatethekeyaspectsofsection115,theytooaresubject
totheperiodicstatutoryrateadjustments.
880
Section114providesthat45%ofroyaltiesaretobepaidtothefeaturedartist,2.5%tothe
unionthatrepresentsnonfeaturedmusicians,and2.5%totheunionfornonfeaturedvocalists,
withtheremaining50%paidtotheownerofthesoundrecording,typicallyarecordlabel.17
U.S.C.114(g)(2).
881
175
U.S.CopyrightOffice
administrativefeefromdistributedroyaltiescurrentlyapproximately4.5%tooffset
itscostsofoperations.882
SoundExchangeengagesinsignificanteffortstolocateandregisterartistswhose
royaltiesitisholding.Byregulation,unattributedroyaltiesthatremainunclaimedafter
aperiodofatleastthreeyearsmaybeusedtohelpdefraySoundExchangesongoing
administrativeexpenses.883Inrecentyears,thepoolofunclaimedroyaltiesthatarethree
ormoreyearsoldhasrangedashighas$31milliondollars.884Bycomparison,however,
SoundExchangesannualdistributionstotaled$773millionin2014.885
a. Scope of Licenses
Notwithstandingthecomparativelypositivereviewsofthesection112and114licenses,
thereareafewwaysinwhichsomehavesuggestedtheyshouldbetweaked.
Adjust to Include Terrestrial
Incontrasttothegeneralsentimentsofmusicalworkowners,someindependentrecord
labelsandartistswhomaybemorechallengedinnegotiatingwithmusicservicesthan
theirlargercounterparts,andalsolikebeingpaidthroughSoundExchangehave
suggestedthatthesection112and114compulsorylicensesbeexpandedtocover
interactivestreaminginadditiontononinteractivemodels.886Digitalproviders,too,
wouldwelcomesuchachange.887
882
883
37C.F.R.380.8.
PressRelease,SoundExchange,SoundExchangeReleasesListofRecordingArtistsandRecord
LabelswithUnclaimedDigitalPerformanceRoyalties(Aug.15,2012),http://www.
soundexchange.com/pr/soundexchangereleaseslistofrecordingartistsandrecordlabelswith
unclaimeddigitalperformanceroyalties/.SoundExchangerecentlyreallocated$9.3millionfrom
itsunclaimedroyaltypooltoitsadministrativefund.GlennPeoples,SoundExchange Finally
Releases Old, Unclaimed Royalties,BILLBOARD(Jan.31,2014),http://www.billboard.com/biz/
articles/news/5893782/soundexchangefinallyreleasesoldunclaimedroyalties.
884
See GlennPeoples,SoundExchange Paid Out a Whopping $773 Million in 2014,BILLBOARD(Jan.
29,2015),http://www.billboard.com/articles/business/6457827/soundexchangedigital
performanceroyaltydistributions2014.
885
See FMCFirstNoticeCommentsat1112;KohnFirstNoticeCommentsat1314;SAGAFTRA
&AFMFirstNoticeCommentsat6;see also A2IMFirstNoticeCommentsat5(supportinga
narrowerdefinitionofinteractive).
886
See Tr.at138:19139:09(June4,2014)(LeeKnife,DiMA)(Theideathatwe[DiMAservices]
havetogotoallofthesedifferentpeople,dependingonwhetheryoureinteractive,youre
noninteractive,whetheryouredownloading,whetheryourestreamingitandthedownloadis
availabletobeheardwhileitsdownloading...mostofmyserviceswanttoordoengageinall
887
176
U.S.CopyrightOffice
WhiletheOfficeunderstandsthesepointsofview,itseemsunlikelyasapoliticalmatter
thatthemajorrecordlabelscouldbepersuadedtogiveuptheircurrentabilityto
negotiatesuchratesintheopenmarket.Moreover,theOfficedoesnotperceivethatthe
voluntarymarketforlicensingofsoundrecordingrightsisnotfunctioning.
Thatsaid,assumingCongressbroadensthesoundrecordingperformancerightto
includeterrestrialbroadcasts,inkeepingwiththeprinciplethatanalogoususesshould
betreatedalike,itwouldseemonlylogicalthatterrestrialusesshouldbeincluded
underthesection112and114licenses.TheCRBwouldbeinthebestpositionto
establishequitableratestoapplytobothovertheairandinternetradio.
Qualifying Versus Nonqualifying Services
Thesection112and114licensingframeworkexcludesinteractivestreamingand
imposesadditionaltechnicalrequirementsaswellonthoseseekingastatutorylicenses.
Whilelicenseescomplainabouttheconstraintsofsection114,ontheothersideofthe
coin,questionsariseastohowmuchcontrolalistenershouldbeabletohaveovera
customizedradioplaylistbeforetheserviceisconsideredtobeofferingmoreofanon
demandthanpassiveexperience.
Section114definesaninteractiveserviceinrelevantpartasonethatenablesamember
ofthepublictoreceiveatransmissionofaprogramspeciallycreatedfortherecipient,or
onrequest,atransmissionofaparticularsoundrecording,whetherornotpartofa
program,whichisselectedbyoronbehalfoftherecipient.888In2009,theSecond
CircuitCourtofAppealsheldthattheLaunchcastmusicservicewhichdidnotoffer
ondemandstreamingbutcustomizeditsprogrammingforrecipientsbasedontheir
individualratingsofsongswasnotinteractivewithinthemeaningofthisdefinition.889
Asaresultofthisprecedent,internetradioservicesofferingcustomizedlistening
experiencesareabletooperateunderthecompulsorylicenseregime.
SomequestiontheSecondCircuitsinterpretationofthelinebetweeninteractiveand
noninteractivestreaming.890AsarticulatedbytheRIAA,[t]he[Launch Media]decision
hasemboldenedservicestoofferlistenersanincreasinglypersonalizedlistening
experienceundercolorofthestatutorylicense,andallbutextinguishedvoluntary
ofthosedifferentactivitiesatonce.Wedlovetobeabletojustgetalicenseformusicandsimply
reportwhatthetypeofusewasandpayforit.).
17U.S.C.114(j)(7).
888
Launch Media, 578F.3dat164.
889
See RIAAFirstNoticeCommentsat3334;SAGAFTRA&AFMFirstNoticeCommentsat56;
see also NARASFirstNoticeCommentsat5;NABFirstNoticeCommentsat4;NRBMLCFirst
NoticeCommentsat24;NPRFirstNoticeCommentsat5;SRNBroadcastingFirstNotice
Commentsat1.
890
177
U.S.CopyrightOffice
licensingofpersonalizedstreamingservicesatapremiumtothestatutoryrate.891The
RIAAschiefconcernappearstobethattherateforcustomizedradioisthesameasthat
forcompletelynonpersonalizedofferings.
WhiletheOfficehassomereservationsabouttheinterpretationofsection114bythe
Launch Media courtwhichseemssomewhatintensionwiththestatutorylanguage
thereappearstobenooverwhelmingentreatytoremovecustomradiofromthe
statutoryregime.892Withinthatregime,however,itmaybeappropriatetodistinguish
betweencustomandnoncustomradio,asthesubstitutionaleffectofpersonalizedradio
onpotentiallycompetinginteractivestreamingservicesmaybegreaterthanthatof
servicesofferingacompletelynoncustomizedexperience.Whiletheissuecouldbe
addressedlegislatively,suchanapproachwouldnotappeartorequirestatutorychange,
astheCRBhasthediscretiontosetdifferentratetierstodaywhentherecordsupports
suchanoutcome.893
Fortheirpart,internetprovidershavecriticizedtheconstraintsthatsection114imposes
onservicesthatseektooperateunderthecompulsorylicense.894Theseincludethe
soundrecordingperformancecomplement,arestrictionthatlimitsthefrequencywith
whichsongsfromthesamealbumorbythesameartistmaybeplayedbytheservice.895
Thereisalsoastatutoryprohibitionagainstannouncingupcomingsongsapractice
thatiscommonintheterrestrialworld,andthereforepresentsproblemsforonline
simulcasters.896Congressincludedtheselimitationsinthesection114licensetomitigate
thepotentialsubstitutionalimpactofnoninteractivestreamingonsalesorotherrevenue
streams.897
IntheOfficesview,thesesortsofrequirementsfallintoacategoryofrelativefine
tuningofthelicense.Butforthefactthattheyarelaidoutinthestatuteitself,their
891
See, e.g., id.(While,atthisjuncture,wedonotnecessarilyadvocateexcludingfromthe

statutorylicenseservicesthathavebeengenerallyacceptedasoperatingwithinthestatutory
licensebasedonthe[Launch Media]decision,wedothinkitisimportant,ataminimum,that
servicesofferingmorefunctionality,suchaspersonalizationfeatures,shouldpayhigherrates.).
892
See 17U.S.C.114(f)(1)(A)(2)(A)(ratesandtermsshalldistinguishamongdifferenttypesof.
..servicesinoperation);id.803(c)(3)(CRBsdeterminationtobesupportedbywrittenrecord).
893
See NABFirstNoticeCommentsat4;NRBMLCFirstNoticeCommentsat24;NPRFirstNotice
Commentsat5;SRNBroadcastingFirstNoticeCommentsat1.
894
17U.S.C.114(j)(13).
895
17U.S.C.114(d)(2)(C)(ii).See, e.g., NABFirstNoticeCommentsat45;NRBMLCFirstNotice

Commentsat24;NPRFirstNoticeCommentsat5;SRNBroadcastingFirstNoticeCommentsat
1.
896
SeeH.R.REP.No.104274,at1315,2021.
897
178
U.S.CopyrightOffice
particularswouldseemtobemoreappropriatelytheprovinceofregulation.As
suggestedbelow,theOfficebelievesthatinupdatingthemusiclicensingsystem,
Congressshouldcommitmoreofitsnuancestoadministrativeoversight.Thetechnical
conditionsforeligibilityunderthesection112and114licenseswouldseemtofallinto
thiscategory,astheeffectivenessandimpactoftheseprovisionshaslikelychanged,and
willcontinuetochange,overtime.
Finally,somehavesuggestedamodificationoftheprovisionsofsection112and114that
permitthemakingofserverorephemeralcopiestofacilitatelicensedservices.
Thesepartiesseektoconfirmthatmultipleservercopiesmaybemadeandretained
indefinitelybyalicensedservice.898Althoughthemainprovisionatissue17U.S.C.
112(e)islessthanamodelofclarity,899theOfficeisnotawarethattheimprecisionhas
resultedinanyrealworlddisputes,anddoesnotseethisasanespeciallypressing
issue.900Nonetheless,itwouldprobablybeworthwhileinanygeneralupdateofsection
112and114torefinethestatutorylanguagewithrespecttothenumberandretentionof
servercopiessoastoeliminateanydoubtastotheoperationofthesection112license.
b. Ratesetting
Theembattledratesettingstandardsforinternetandsatelliteradiosection801(b)(1)
versuswillingbuyer/willingsellerarediscussedatsomelengthaboveinconnection
withoverallquestionsoflicensingparity.Asexplainedthere,theOfficebelievesthat
governmentratesettingprocessesforbothsoundrecordingsandmusicshouldbe
conductedunderasingle,marketorientedstandard.Accordingly,intheOfficesview,
CTIAFirstNoticeCommentsat1618;NABFirstNoticeCommentsat2,7;MusicChoiceFirst
NoticeCommentsat1113;DiMASecondNoticeCommentsat18.
898
Section112(e)somewhatcrypticallyindicatesthatonlyasinglephonorecord(i.e.,servercopy)
canbemadeunlessthetermsandconditionsofthestatutorylicenseallowformore.17U.S.C.
112(e).
899
Alargerquestionmaybewhethertheprovisionsofthesection112licensepertainingtothe
copiesmadetosupportsection114servicesshouldbefoldedintosection114tocreateatruly
unifiedlicensecoveringbothperformancesandnecessaryreproductionrights.Asitcurrently
stands,theCRBisobligatedintherelevantratesettingproceedingstosetaseparate(andin
practice,essentiallynominal)ratefortheephemeraluses.See 17U.S.C.112(e)(3);
SoundExchange, Inc. v. Librarian of Congress,571F.3d1220,122526(D.C.Cir.2009)(remandingto
theCRBtospecifyaroyaltyfortheuseoftheephemeralrecordings);DeterminationofRatesand
TermsforPreexistingSubscriptionServicesandSatelliteDigitalAudioRadioServices,75Fed.
Reg.5513(Feb.3,2010)(settingaseparaterateforthe112(e)license).Theproportionofroyalties
payableundersection112isofsomeeconomicconsequence,however,asunlikesection114
royaltieswhicharepaiddirectlytoperformingartistsandmusiciansaswellastorecord
labelssection112royaltiesarepaidonlytosoundrecordingowners.See ReviewofCopyright
RoyaltyJudgesDetermination,73Fed.Reg.at9146.Becauseitwasnotafocusofdiscussion
duringthestudy,theOfficehasnotformedanopiniononthis.
900
179
U.S.CopyrightOffice
thesection112and114ratescurrentlysetunderthe801(b)(1)standard(i.e.,those
applicabletosatelliteradioandpreexistingsubscriptionservices)shouldbemigratedto
thewillingbuyer/willingsellerstandardorsomealternativeformulationaimedat
establishingratesequivalenttothosethatwouldbenegotiatedinthefreemarket.901The
Officefurtherrecommendsthatratesettingshouldoccuronanasneededbasis,as
describedabove.
c. Producer Payments
TheOfficenotesthefurtherconcernofsomethatthesection112and114royalty
allocationsdonotrecognizethecontributionsofsoundrecordingproducers,whoin
manyinstancesnotonlysupervise,butalsohavesignificantcreativeinputinto,finished
recordings.Despitethefactthatmanyproducersarecreatorsofsoundrecordingsin
theirownright,theyarenotamongthepartiesentitledbystatutetodirectpaymentby
SoundExchange.902
Compensationofproducersiscontractuallybased.Theymaybepaidanupfrontfeefor
theireffortsand/orreceiveashareoftheartistsfutureroyalties.903Insomecases,an
artistmayprovidealetterofdirectionrequestingSoundExchangetopaytheproducers
shareoftheartistroyaltiescollectedbySoundExchange,whichSoundExchangewill
honor.904NARAShassuggestedthatthisinformalpracticewhichisnotcontemplated
bythestatutorypaymentmechanismsetforthinsection114berecognizedthrougha
legislativeamendment.InNARASwords,thiswillprovideproducersthesamefair,
directpaymentoptionavailabletoperformers.905
Becausetheproducerssharecomesoutofthefeaturedartistsstatutoryentitlement,
suchrecognitionwouldnotrequireachangeinthecurrentstatutoryallocation,but
wouldmerelyclarifytheauthorityofSoundExchangetohonoraletterofdirection.
Section114providesforaninterimratesettingprocessfornewservices.See 17U.S.C.
114(f)(2)(C)(allowingcopyrightownersornewservicestoinitiateoutofcycleproceeding).It
doesnotprovideforexpeditedproceedings,however.TheOfficedidnothearmuchaboutthe
useorefficacyofthisprocessinthecourseofitsstudy,perhapsbecauseitisrarelyinvoked.As
discussedinconnectionwithmusicalworkperformanceandmechanicallicenses,however,the
Officebelievesitisimportanttohaveacosteffectiveandexpeditiousinterimratesetting
procedure,whichcouldbeimplementedforthesection112and114licensesaswellunderthe
Officesproposedsystem.
901
Theseincludesoundrecordingowners,featuredartists,andunionsrepresentingnonfeatured
musiciansandvocalists.17U.S.C.114(g)(2).
902
PASSMANat121126.
903
2013 SoundExchange Letter of Direction.
904
905
180
U.S.CopyrightOffice
Thoughitwouldbebeneficialtohearmorefromartistsonthisissue,906theOfficeagrees
thatNARASproposaltoconfirmtheexistingpracticethroughatechnicalamendment
ofthestatutemeritsconsideration.
d. Termination Provision
Unlikesection115,sections112and114donotincludearighttoterminatealicensee
thatfailstoaccountforandpayroyalties.Thisnotonlyseverelyunderminestheability
ofSoundExchangetopolicenoncompliantlicenses,butalsoallowssuchlicenseesto
continuetoexploitvaluablesoundrecordingswithoutpaymenttotheirowners.As
SoundExchangeexplainsit:
Noncompliance with statutory license requirements is commonplace.
For 2013, approximately a quarter of royalty payments werenot made on
time; twothirds of licensees required to deliver reports of the recordings
theyusedhavenotdeliveredatleastonerequiredreport;andatleastone
quarterofsuchlicenseeshavenotdeliveredanysuchreportsatall.907
SoundExchangeobservesthatittriestoworkwithproblemlicenseestoimprovetheir
compliance.Butwhensucheffortsproveunsuccessful,SoundExchangeandthe
copyrightownersitrepresentsshouldhavearemedy.TheOfficedoesnotseea
justificationforcontinuedlicensingofauserthatisnotmeetingitsobligations.The
OfficethereforeagreeswithSoundExchangethatthesection112and114statutory
licensesshouldbeamendedtoincludeaterminationprovisionakintothatinsection
115.908
5. Public and Noncommercial Broadcasting

Publicbroadcastersincludingnoncommercialeducationalbroadcasterslamentthe
inefficienciesandlimitationsofthestatutoryprovisionsinsections114and118that
906
Recordingartistsdidnotcommentonthisproposalinthecourseofthestudy.
907
908
Section115providesthat:
If the copyright owner does not receive the monthly payment and the monthly
and annual statements of account when due, the owner may give written notice
to the licensee that, unless the default is remedied within thirty days from the
date of the notice, the compulsory license will be automatically terminated. Such
termination renders either the making or the distribution, or both, of all
phonorecords for which the royalty has not been paid, actionable as acts of
infringement under section501and fully subject to the remedies provided by
sections502through506.
17US.C.115(c)(6).
181
U.S.CopyrightOffice
governtheiruseofmusiccontent.909TheOfficeconcursthattheseprovisionsare
unwieldyandbelievesthattheyshouldbereviewedandupdatedtobetterreflect
Congressdesiretoaccommodatepublicbroadcastingactivities.910
Especiallyinlightoftherelativelylowroyaltyratespaidbypublicbroadcasters,it
makeslittlesensetorequirethemtoengageinamultitudeofnegotiationsand
ratesettingproceedingsindifferentforabeforetheCRBundersections112and114for
digitalsoundrecordingperformancerights,beforetheCRBundersection118forover
theairmusicalworkperformanceandassociatedreproductionrights,undertheconsent
decreesfordigitalmusicalworksperformancerightscoveredbyASCAPandBMI,and
throughprivatenegotiationsformusicalworkperformanceandreproductionrights
fallingoutsideoftheforegoingcategories.911Instead,theOfficesuggeststhatthe
ratesettingprocessesapplicabletopublicbroadcastersbeconsolidatedwithinaunified
licensestructureundersection118undertheauspicesoftheCRB.912Byseparatingout
allnoncommercialusesforconsiderationunderasingleframework,theroyaltyratesfor
publicbroadcasterswouldlikelybemuchmoreefficientlyresolved.913
SeeEMFFirstNoticeCommentsat515;NPRFirstNoticeCommentsat47;NRBNMLCFirst
NoticeCommentsat1422;PTCat312.
909
See, e.g.,H.R.REP.NO.941476,at117(notingthatencouragementandsupportof
noncommercialbroadcastingisinthepublicinterestandthatthenatureofpublicbroadcasting
doeswarrantspecialtreatmentincertainareas).
910
911
See generallyNRBNMLCFirstNoticeCommentsat1415.
SeeEMFFirstNoticeCommentsat1415.Insoamendingthesection118licensetocoverboth
soundrecordingandpublicperformancerights,itmaybeappropriatetoexpandtheantitrust
exemptioncurrentlycontainedinsection118tofacilitatecollectivenegotiationofrightsbetween
noncommercialusersandcopyrightownersforusesoutsidethestatutorylicenseaswell.See
PTCFirstNoticeCommentsat11.
912
CompareNRBNMLCFirstNoticeCommentsat14(notingthat[f]orthelastseverallicense
terms,religiousbroadcasters...havebeenabletoagreeuponratesandtermswithASCAP,BMI,
andSESACwithouttheneedforaratesettingproceeding), withEMFFirstNoticeCommentsat
89(notingthatthesection114rulemakingjoinsbothcommercialandnoncommercialentities,
andthatnoncommercialentitiesarerarelyabletonegotiatedaprelitigationsettlementforcing
theirparticipationintheCRBlitigationprocess).
913
Inestablishingaunifiedlicenseforpublicbroadcastactivities,theOfficeseesnoneedtodepart
fromitsviewthat,aswithotherstatutoryuses,theCRBshouldconsidersuchratesundera
generallyapplicable,marketbasedstandard.Experiencewiththesection112and114ratesetting
processfornoncommercialentitieshasshown,forexample,thatthewillingbuyer/willingseller
standardcanadequatelyaccountforthelimitedfinancialresourcesof,andotherfactors
particularto,noncommercialusers.SeeNRBNMLCFirstNoticeCommentsat1113(notingthat
theCARPandCRBhaveconsistentlysetlowerratesfornoncommercialbroadcasters).
182
U.S.CopyrightOffice
Inreformingthesection118license,Congressshouldensureitappropriatelyfacilitates
digitaltransmissionsbypublicbroadcasters,includingthestreamingofarchived
programming.914Butabsentasignificantchangeincongressionalpolicy,theOfficesees
noneedtoexpandthestatutorylicensetoincludepermanentusessuchasdownloadsor
physicalproducts,assomenoncommercialbroadcastershavesuggested.915Thecurrent
statutoryprovisionsforpublicbroadcastingfocusonperformancesinthecourseof
overtheairprogrammingratherthanthedistributionofcopyrightedworks.Permanent
usesbynoncommercialentitiesorevenondemandstreamingofindividualsongs
outsideofthecontextoftheoriginalprogrammingcoulddisplacecommercialsales,
makingitlessclearthatthatspecialtreatmentisappropriate.
D. Licensing Efficiency and Transparency

Thereseemstobeuniversalagreementamongindustryparticipantsthataccurate,
comprehensive,andaccessiblelicensinginformation,aswellastransparentusageand
paymentdata,areessentialtoabetterfunctioningmusiclicensingsystem.
1. Industry Data
a. Publicly Accessible Database
Somestakeholdershavesuggestedthatthegovernmentforexample,theCopyright
Officecouldundertakethetaskofcreatingandmaintainingacomprehensivedatabase
ofmusicalworkandsoundrecordinginformation,includingasystemofstandard
identifiers.916Asappealingassuchavisionmaybe,theOfficebelievesthatitwouldnot
bethebestresultforthetwentyfirstcenturymarketplacetohavethegovernmentstart
fromscratch.Therelevantuniverseofmusicdatacomprisestensofmillionsofmusical
works,soundrecordingsandinformationaboutthem.Settingasideanylegal
impediments,asapracticalmatter,itwouldbeextremelychallengingforthe
governmenttogather,ingest,andstandardizethisoceanofinformationtobemade
availablewithinausefultimeframe.Anysuchdatabasewouldbehighlydynamicand
requireaconstantflowofinformationfromMROs,publishersandothersconcerning
newlycreatedworks,transfersofownership,andchangesinlicensingauthoritytobe
keptuptodate.Thesearefunctionsalreadyperformedinvaryingdegreesbyexisting
privateorganizationsincollaborationwithindividualstakeholders.
Inlightoftheaboveconsiderations,theOfficebelievesthatanysolutiontothemusic
dataproblemshouldnotcompetewith,butinsteaddrawupon,existingindustry
resources.Asathresholdmatter,anycentralizeddatabaseshouldbecloselytiedtothe
914
915
SeeNPRFirstNoticeCommentsat7.
916
ABKCOFirstNoticeCommentsat4;DiMASecondNoticeCommentsat5.
183
U.S.CopyrightOffice
interestsofthecopyrightownersandlicenseesitserves.Thatsaid,thegovernment
shouldestablishincentivesthroughthestatutorylicensingregimetoencourageprivate
actorstocoordinatetheireffortsandcontributetoapubliclyaccessibleandauthoritative
database.Inotherwords,thereisaroleforboththegovernmentandprivatesector
alike.917
b. Adoption of Data Standards

Thelackofuniqueanduniversallyemployedidentifiersforthemillionsofmusical
worksandsoundrecordingsinthemarketplacehasbeenatopicofdiscussionand
sourceofdiscouragementamongindustryparticipantsformanyyears.Asaresult,
therehavebeensomelaudableeffortswithintheindustrytoaddressthedataproblem
bypersuadingmarketparticipantstoadoptstandardidentifiersandmessagingformats,
withsomeamountofsuccess.TheDDEXmessagingsystemappearstohaveemergedas
aleadingindustrystandardfortheformattinganddeliveryofmetadatarelatingto
transactionsinvolvingdigitalmusic.918Amorerecentexampleofcollaborationisthe
MusicMarkinitiative,whichwouldrationalizeandreconcilesometimesconflictingPRO
songdataamongtheAmericanandCanadianPROsASCAP,BMI,andSOCAN.919
Butdespitetheseefforts,sofar,nocomprehensivesolutiontothedataissuehas
emerged.920Inpart,thisappearstobeaproblemofcoordinatingprivateactors,manyof
whomareinvestedin,andunderstandablyrelyupon,theirowndatasystemsanddo
notwishtounderminetheseimportantassets.Itisalsoalegacyproblem,inthatmuch
ofthedatausedtodayoriginatedinthepredigitalera,whenstandardizationand
interoperabilitywerenotcriticalconcerns.Forexample,theindustrydidnotimplement
standardconventionsforthetreatmentofartistorsongwriternames.Someactorsmay
ThisdoesnotmeanthattheCopyrightOfficeshouldnotitselfseektomaintainmorerobust
musicdata.Totheextentithastheresourcestomodernizeitssystemstoaccommodatemore
comprehensivedata,itshould.Forexample,thecopyrightregistrationdatabasecouldbe
modifiedtoincorporateidentifierssuchasISRCsandISWCs.TheOfficespaperbased
recordationsystemshouldbereengineeredtobecomeanelectronicprocesssoitiseasierto
recordandresearchtransfersofownership.Bothofthesechangeswouldhelpwouldbe
licenseeslocatemusicowners.TheOfficehasbeenreviewingtheseandothertechnologyand
datadrivenquestionsinseparatepublicprocesses. See, e.g.,BRAUNEIS;see alsoMariaPallante,
Next Generation Copyright Office: What it Means and Why it Matters,61J.CopyrightSocyU.S.A.213
(2014).
917
918
About DDEX,DDEX,http://www.ddex.net/aboutddex(lastvisitedJan.9.2015).
Tr.at263:21264:03(June24,2014)(StuartRosen,BMI);see also ASCAP, BMI and SOCAN
Collaborate on MusicMark,ASCAP(Apr.2,2014),http://www.ascap.com/playback/2014/04/action/
ascapbmisocanmusicmarkcollaboration.aspx.
919
920
PRS disappointed at Global Repertoire Database collapse,MUSICALLY.
184
U.S.CopyrightOffice
seelittleshorttermgaintoberealizedfromthesubstantialinvestmentofresourcesit
wouldtaketocleanupandharmonizeolderrecords.
Somestakeholdersadvocateforanentirelynewapproachtotrackingcreativeworksand
usage,suggestingthatweshouldlooktonewtechnologiestoattachuniqueidentifiersto
eachdifferentversionofasong,eachdifferentrecordingofthatsong,eachindividuals
interestinthatsong,andeachindividualuseofthatsong.921Oneinterestingproposal
wouldrelyonaudiofingerprintingratherthanjustmetadatatoidentifysongs.922The
Officehopesthattheseorothertechnologicalinnovationsmaysomedaybedeployedto
thebenefitofthemusicmarketplace.
Fornow,though,theOfficebelievesitisimportanttofocusonwhatmightbe
reasonablyachievedintheneartermagaintakingintoconsiderationandcapitalizing
uponindustrypracticesastheyexisttoday.Tothisend,theOfficesolicitedcomments
onthemostcommonlyusedandusefulidentifiers,andreceivedhelpfulguidancefrom
anumberofparties.923Basedonthesecomments,itappearsthatthemostcriticaland
widely(thoughnotuniversally)usedidentifiersare,inthecaseofmusicalworks,the
ISWC,andinthecaseofsoundrecordings,theISRC.TheOfficebelievesthesetwo
identifiersshould,overaperiodoftime(e.g.,fiveyears)becomerequiredelements
withintheproposedGMROmanageddatabase,asdescribedbelow.
AmorerecentstandardistheISNI,whichcanbeusedtoidentifysongwritersand
recordingartists,andisgainingacceptanceintheindustry.Thereappearstobegeneral
agreementthat,asnewusersandusescontinuetoproliferate,andindividualwriters
andartistsseektoparticipateinthemarketplace,itisofcriticalimportancetobeableto
identifycreatorsunambiguously.924ASCAPandBMIhavealreadybegunimplementing
useofISNI.925ThisisanotherdatastandardthattheOfficebelievesshouldbe
encouragedandpossiblymademandatoryoveraplausibletimeframe.
Music Licensing Hearingsat7172(statementofJimGriffin,OneHouse).
921
Tr.at243:1318(June17,2014)(HeleneMuddiman,CEO,HollywoodEliteComposers);see also
How Content ID Works,GOOGLE,https://support.google.com/youtube/answer/2797370?hl=en(last
visitedJan.23,2015).
922
OfparticularassistancewasthestudentsubmissionfromthePipelineProject2014,Belmont
UniversitysMikeCurbCollegeofMusicBusinessandEntertainment,whichprovidedan
insightfulsummaryandanalysisofrelevantdatastandardsbasedonaseriesofinterviewsthe
studentsconductedwithmusicindustryprofessionals.See PipelineProjectSecondNotice
Comments.
923
924
KristinThomson,Metadata for Musicians.
ASCAPSecondNoticeCommentsat8; see also PipelineProjectSecondNoticeCommentsat4

5.
925
185
U.S.CopyrightOffice
TheISWCstandardandtheISRCstandardareinternationallyrecognized,asistheISNI.
TheISWC,developedbyCISAC,isassignedbyindividualqualifiedregionalorlocal
numberingagencies;intheU.S.andCanada,ASCAPistheappointedISWC
administrator.926TheISRC,administeredbyIFPI,isallocatedbyappointedregional
agenciesineachcountry;theU.S.ISRCagencyistheRIAA.927TheISNIstandard,
launchedwithCISACsparticipation,ismeanttoreplaceexisting,disparate
identificationstandardsforindividualcreators.928ISNIsareassignedtoU.S.authorsby
oneormoredesignatedprivateregistrationagencies.929
TheOfficesfocusontheabovestandardsdoesnotmeanthatothersareunimportantor
irrelevant.930Legacystandardsremainusefulforparticularentities,931andnew
standardsmaycomeintoplay.Thepossibilityofidentifyingsoundrecordingsand
musicalworksthroughaudiobasedsamplingtechnologiesisespeciallyintriguing.
Basedonthecurrentstateofaffairs,however,theOfficebelievesthatthemostrealistic
strategytoaddressthedataissuesplaguingthemusicindustryatpresentwouldbeto
stronglyincentivizetheuniversaladoptionanddisseminationofatleastthethreedata
standardsdescribedabove.Beyondthis,asdiscussedbelow,itwouldmakesenseto
provideforregulatoryauthoritytoallowfortheconsiderationandadoptionof
additionaldatastandardsovertimeasappropriate.
2. Fair Reporting and Payment

a. Writer and Artist Shares
Throughoutthestudy,aparamountconcernofsongwritersandrecordingartistsis
transparencyinreportingandpayment.Asdigitallicensingdealsmultiplyandincrease
incomplexity,itcanbecomequitedifficulttofollowthemoney.Songwritersandartists
Frequently Asked Questions,ISWCINTERNATIONALA GENCY,http://www.iswc.org/en/faq.html

(lastvisitedJan.23,2015);PipelineProjectSecondNoticeCommentsat5.
926
Obtaining Code,USISRC.ORG,http://www.usisrc.org/about/obtaining_code.html(lastvisited
Jan.23,2015);PipelineProjectSecondNoticeCommentsat6.
927
SeeGatenby&MacEwanat56.
928
ThefirstU.S.registrationagencyisBowker,anaffiliateoftheresearchandtechnology
companyProQuest.Seeid.;Bowker Becomes First ISNI Registration Agency in the U.S.,BOWKER
(June21,2012),http://www.bowker.com/enUS/aboutus/press_room/2012/pr_06212012a.shtml;
Bowker,Use of ISNI Is Growing Fast Among Authors, Says New Bowker Analysis,YAHOOFINANCE
(May7,2014),http://finance.yahoo.com/news/isnigrowingfastamongauthors144800650.html.
929
Assuggestedbelow,additionalstandardsthatmightbeusefulineithertheshortorlonger
termcouldbeevaluatedandpotentiallyadoptedbyregulation.
930
Forexample,ifIPIsandUPCs(discussedabove)continuetoberelevantinsomecontexts,and
mightbeconsideredaspotentialadditionaldataelementstobecollectedintheGMROdatabase.
931
186
U.S.CopyrightOffice
wanttoensurethattheyunderstandtheroyaltyscheme,areabletotracktheuseoftheir
works,andarepaidwhattheyareowed.
Inthecaseofperformanceroyalties,suchconcernsaregreatlydiminishedwhenthe
songwriterorartistispaidthroughaPROorSoundExchange.PROsemploy
distributionrulesthataregenerallyknownbytheirmembers,932whileSoundExchange
allocatesroyaltiesaccordingtothestatutoryformula.Inthecaseofadirectdeal,
however,thelabelorpublisherisobligatedonlybythetermsoftheartistorsongwriter
agreement,whichmaynotexpresslyaddresstheseissues.933
Ofparticularconcernarethesometimessizeableadvancesagainstfutureroyaltiesthat
arepaidbyonlineservicestomajorrecordlabelsandmusicpublishers,andwhether
andhowthesearereportedtoandsharedwithartistsandwriters.Sometimes,ifroyalty
obligationsarelessthananticipated,suchanadvancemaynotbefullyrecoupedbythe
serviceduringthelicensingperiod,sothereareleftoverfunds.Insuchasituation,there
maybenoclearunderstandingorcontractualprovisionthataddresseswhetherthose
fundsshouldbepaidouttothesongwriterorartist,andifso,onwhatbasis.Arecent
exampleoftheadvanceissuecitedbysongwritersisadirectdealbetweenthepublisher
Sony/ATVandDMXmusicserviceforpublicperformancerights,inwhichSony/ATV
apparentlyreceivedalargeadvancefromtheservicepossiblyinexchangeforalower
royaltyrate.934Songwritersworrythattheyarenotabletomonitorthistypeof
arrangementtoensurethattheyreceivetheirfairshareofthetotalconsiderationpaid
fortheuseoftheirworks.
Alsoconcerningtomusiccreatorsisthefactthatlabelsandpublishersarenowknown
totakeequitystakesinonlineservicesaspartoftheirlicensingarrangements.For
example,themajorlabelstogetherreportedlynegotiatedanearly18%stakeinSpotify.935
ASCAPs Survey and Distribution System: Rules & Policies,ASCAP(June2014),

http://www.ascap.com/~/media/files/pdf/members/payment/drd.pdf;Royalty Policy Manual,BMI,
http://www.bmi.com/creators/royalty_print(lastvisitedJan.16,2015).Althoughsongwriters
appeargenerallytohaveconfidencethatthePROsarereportingtothemaccurately,thereare
somewriterswhotakeissuewiththedistributionrulesthemselves.Forexample,ASCAPand
BMIpaysubstantialbonusesforcurrenthits,whichreducetheroyaltypoolforevergreentitles.
Inaddition,PROsrelyonsamplingtechniquesratherthancensusdatatocalculateroyaltiesin
manycontexts,whichsomecomplainmaycauselesspopularsongstobeoverlooked.Tr.at
22:1127:01(June5,2014)(RoyalWadeKimes,WondermentRecords)(Wedoneedacollective,
ASCAP,BMI,somebodytocollectthestuff,butwealsoneedittobedistributedrightly.).
932
Indeed,atleastuntilrecently,songwriteragreementswithpublisherssimplyassumed
paymentofthewritersshareofperformanceroyaltiesbyaPRO.See, e.g.,Tr.at71:1372:03(June
5,2014)(BrittanySchaffer,NMPA/Loeb&LoebLLP).
933
MMF&FACSecondNoticeCommentsat1617,47n.70;SGASecondNoticeCommentsat14
15,Exhibit2n.7.
934
SeeLindvall, Behind the Music: The Real Reason Why the Major Labels Love Spotify.
935
187
U.S.CopyrightOffice
Questionsariseastohowsuchequitydealsare(orarenot)reportedtoartistsand
songwriters,andwhetherthevaluereceivedbythelabelorpublisherimpactsthe
royaltiesthatarepaid.936Again,theartistorsongwritercontractmaynotaddresssuch
issues.937
Theseconcernsmustbeaddressedaspartofanyupdatedlicensingframework,
especiallyonethatallowspublisherstooptoutofthestatutorylicensingsystemand
pursuedirectdeals.Asmentionedabove,underanysuchdeal,songwritersshouldhave
theoptionofbeingpaidtheirwritersshareofperformanceroyaltiesdirectlythrough
theirpreferredMRO.Thatis,evenifthemusicserviceispayingthepublishers
royalties(includingmechanicals)tothepublisherdirectly,itwouldtransmitacopyof
itsusagereportandthewritersshareofperformanceroyaltiestotheMROfortheMRO
toadminister.938TheOfficetruststhatsuchanapproachcouldbeacceptabletothe
publishers,sincethemajorpublisherswhohavebeencontemplatingwithdrawalfrom
thePROsappearalsotobeconsideringthepossibilityofcontinuingadministrationof
royaltydistributionsbythePROsunderdirectlylicenseddeals.939
WhiletherehasbeenlessfocusonthisissueinrelationtoSoundExchangewhichisnot
facingalargescalewithdrawalproblem940theOfficenotesthatthesameprinciple
See A2IMSecondNoticeCommentsat57(explainingthatsomeofthelargestdigitalmusic
serviceshaveenteredintodirectlicensingdealswithrecordlabelsorpublishersthatinclude
compensationintheformofadvancesorequity,butthatsuchcompensationisnotnecessarily
sharedwithcreators);SGASecondNoticeCommentsat1415.
936
Notably,however,musicpublishershaveaddressedthisissueintheirnegotiatedstreaming
settlementundersection115,sinceadoptedasregulation.37C.F.R.385.Thedefinitionof
revenuetowhichthepercentageroyaltyrateisappliedinthestreamingregulationsrequires
recordcompaniestoaccountforanythingofvaluegivenfortheidentifiedrightstoundertake
thelicensedactivity,including,withoutlimitation,ownershipequity,monetaryadvances,barter
oranyothermonetaryand/ornonmonetaryconsideration... Id.385.11,385.21(definitionof
applicableconsideration).
937
Toensurethetransparencyofsuchahybridarrangement,thewithdrawingpublishersshould
makethematerialfinancialtermsoftheirdirectdealstheroyaltyrates,advances,andanyother
considerationfromthelicenseeattributabletotheuseofthesongwritersworkavailabletotheir
songwriters.
938
See Pandora Ratesetting,6F.Supp.3dat337;see alsoTr.at38:0608(June17,2014)(David

Kokakis,UMPG);BMISecondNoticeCommentsat14(Inthecontextofpartialrights
withdrawal,BMIcanstillassistpublishersinprovidingcertainroyaltyadministrationservices
fortheirdirectlicensescoveringthewithdrawnrights,withadministrationtermsandfeesas
agreedtobytheparties.BMIwouldcontinuetoprovideitscustomarylicensinganddistribution
servicestothepublishersandsongwriterswithregardtoallotheraspectsofthepublic
performingright.).
939
Inthisregard,however,itshouldbenotedthattherehasrecentlybeensomedirectlicensingof
noninteractivedigitalperformancerightsoutsideofSoundExchange.Asmentionedabove,
940
188
U.S.CopyrightOffice
shouldapplythere.Totheextentrecordcompaniesenterintodirectlicensing
relationshipswithdigitalproviders,artistsandmusiciansshouldhavetheoptionof
continuingtoreceivetheirshareofroyaltiesthroughthatorganization.
b. Best Practices for Transparency

Moregenerally,issuessurroundingtransparencyinreportingandpaymentbymusic
publishersandrecordlabelsundersongwriterandartistagreementsareconcernsthat
mightbeproductivelyaddressedthroughtheconsiderationandadoptionofbest
practicestoeasefrictioninthisarea.In2009,forinstance,recordlabelsandmusic
publishersagreedtoaseriesofvoluntarychangestoimprovelicensingpracticesandthe
flowofroyaltiesundersection115,whichhavebeenmemorializedinacontinuing
memorandumofunderstanding.941Asimilareffortmightbeundertakentoestablish
bestpracticestoensuretransparencyinlabelandpublisherreportingandpaymentto
creators.TheOfficehopesthatmajorlabelsandpublisherswillconsiderengagingwith
artistsandpublishersinavoluntaryfashiontomakeprogressontheseissuesinthe
privaterealm.
E. An Updated Music Licensing System

Asnotedabove,nearlytenyearsago,musicpublishersanddigitalmediacompanies
appealedtoCongresstopassSIRA,legislationthatwouldhavecreatedanewcollective
licensingsystemundersection115forthedigitaluseofmusicalworks.WhileSIRAwas
morelimitedinscopethanwhatwouldseemtobecalledfortoday,itnonetheless
featuredsomeconceptsthattheOfficebelievescouldhelptoinformamoregeneral
overhaulofourlicensingsystem.
iHeartMediahasenteredintolicensingagreementswithWMGandsomeindependentlabelsfor
dealscoveringbothterrestrialandinternetradio.Christman,Heres Why Warner Musics Deal
with Clear Channel Could be Groundbreaking for the Future of the U.S. Music Biz (Analysis).Pandora
recentlystruckadirectdealwithMerlin,anentitythatnegotiatesonbehalfofindependent
recordlabels;underthisarrangement,though,Pandoraagreedtocontinuetopayartistroyalties
throughSoundExchange.GlennPeoples,Pandora Signs First Direct Label Deal with Merlin,
BILLBOARD(Aug.6,2014),http://www.billboard.com/articles/business/6207058/pandoralabel
dealmerlin.
See NMPA Late Fee Program,NMPALATEFEESETTLEMENT.COM,http://www.
nmpalatefeesettlement.com/index(lastvisitedJan.22,2015)(explainingthetermsoftheMOUin
whichrecordlabelsandmusicpublishers(representedbyRIAAandNMPA/HFArespectively)
agreedtoimprovemechanicallicensingpracticesandencouragepromptresolutionofdisputes);
see also Memorandum of Understanding (MOU 2),NMPALATEFEESETTLEMENT.COM,
http://www.nmpalatefeesettlement.com/docs/mou2.pdf(lastvisitedJan.22,2015)(inwhichthe
recordlabelsandmusicpublishersextendedthe2009MOUthrough2017).
941
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First,SIRArecognizedthatitcouldbeappropriatetoallowmorethanoneentity
(referredtoasadesignatedagent)toadministerlicenses,solongaseachsuchentity
representedatleastacertainprescribedshareofthepublishingmarket.Second,SIRA
wouldhaveofferedlicenseestheopportunitytoobtainlicensesonablanket,ratherthan
songbysong,basisbyservingnoticeonthedesignatedagents.Third,SIRArecognized
thatonesuchagent(thegeneraldesignatedagent)shouldserveasadefaultlicensing
entityforpublishersthathadnotselectedadifferentagent.Andfinally,SIRAprovided
foreachdesignatedagenttomaintainadatabaselistingownershipinformationforthe
musicalworksitadministers.942Whiletherewasdisagreementaboutthedetailsof
SIRA,thesebasicorganizingprincipleswereappealingtomany.943TheOffices
proposalforanupdatedlicensingframeworkalsodrawsupontheseconcepts.
ButeventhoughSIRAmayrepresentagoodstartingpoint,itisonlythat.Asdigital
modelshaveproliferated,thedrawbacksofourcurrentsystemhavebecomemore
pronounced.Theinterveningdecadehasproducedagreatersenseofurgency
concerningthestrainsonthecurrentsystem.
Stakeholdersfocusinparticularonthelackofreliablelicensingdata,whichleadsto
inefficienciesandfailuresinthelicensingprocess.TheOfficeagreeswithcommenting
partiesthatmuchofwhatisailingoursystemwouldbegreatlyamelioratedifallthose
whoneededithadaccesstoauthoritativedataconcerningtheownershipofmusical
worksandsoundrecordings.Inaddition,becausedigitalservicestypicallyreceiveonly
trackbasedinformationforsoundrecordingsthatisnottiedtotheunderlyingmusical
work,thereneedstobeanefficientmechanismforlicenseestoassociatethesound
recordingstheyusewiththemusicalworkstheyembody.
1. MROs
UndertheOfficesproposal,excepttotheextenttheychosetooptoutoftheblanket
statutorysystem,publishersandsongwriterswouldbeobligatedtolicensetheirpublic
performanceandmechanicalrightsthroughtheirMROs.944Asexplainedabove,an
SIRA,H.R.5553.
942
SeeHFA,Legislative News: Section 115 Reform Act of 2006 (SIRA) Introduced,SOUNDCHECK,June

2006,at1,available at https://secure.harryfox.com/public/userfiles/file/Soundcheck/
viewSoundCheck606.pdf(While[DiMA,theNMPA,andtheRIAA]havenotreachedcomplete
agreementonallaspectsofthislegislation,weareoptimisticthatinthecomingweekswewill
worktogetherwithChairmanSmithandRepresentativeBermantoultimatelypasshistoric
legislationthatwillpromotegreaterinnovationandcompetitionamongdigitalmusicproviders,
deliverfaircompensationtomusiccreatorsandmostimportantly,greatlyexpandmusicchoice
andenjoymentformusicfans.).
943
Regardlessofoptoutstatus,however,justasisthecasetoday,awillingpublishercouldagree
toavoluntarylicensewithawillinglicenseeoutsideofthestatutoryregime.Butinorderto
require thelicenseetonegotiateoutsideofthestatutoryprocess,thepublisherwouldneedto
944
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U.S.CopyrightOffice
MROwouldhavetheabilitytoadminister,andbundle,performanceandmechanical
rightsonbehalfofthepublishersandsongwritersitrepresented.Itwouldalsocollect
anddistributetheroyaltiesdueundersuchlicenses.945
AnMROcouldbeanyentityrepresentingthemusicalworksofpublishersand
songwriterswithamarketshareinthemechanicaland/orperformancemarketabovea
certainminimumthreshold,forexample,5%.Existingrightsorganizations,suchas
ASCAP,BMI,HFAandothers,couldthusqualifyasMROs.EachMROwouldenjoyan
antitrustexemptiontonegotiateperformanceandmechanicallicensescollectivelyon
behalfofitsmembersaswouldlicenseegroupsnegotiatingwiththeMROswiththe
CRBavailabletoestablisharateincaseofadispute.946ButMROscouldnotcoordinate
withoneanotherand,asdiscussedabove,wouldbesubjecttoatleastroutineantitrust
oversighttoguardagainstanticompetitivebehavior.Theywouldalsobesubjectto
potentialCRBratesettingforallusesoftheirmembersworksexceptforthosethathad
beenwithdrawn.
EachMROwouldberequiredtosupplyacompletelistofthepublishers,works,
percentagesharesandrightsitrepresented,aswellastheMROslicensingcontact
information,totheGMRO,andwouldbeobligatedtokeepthatinformationcurrent.
Therequirementtoidentifythetitlesandwritersofrepresentedworksessentiallytracks
whatisrequiredtodayundertheASCAPconsentdecreeandhaslongbeenvoluntarily
providedbythePROsandHFAthroughtheirpubliclookupdatabases.947Thecritical
assertitsoptoutright.Additionally,toeffectuatesuchavoluntaryarrangement,thepublisher
wouldneedtonotifytheMROoftheagreement,sothattheMROcouldmakeappropriate
adjustmentstoitscollectionanddistributionprocesses.
UnderthenewMRObasedsystem,recordlabelswouldnolongerengageinpassthough
licensingofmusicalworksastheyareentitledtodotodayundersection115.Thirdparty
serviceswouldinsteadseekblanketlicensesfromtheMROs,ordirectlyfromanypublisherswho
hadoptedout.Apartfromlongtimeconcernsbypublishersandsongwritersabouttheir
inabilitytoreceivedirectpaymentfromdigitalservicesunderthepassthroughregime,the
possibilityofvaryingratesundertheupdatedlicensingframeworkbeingproposedwould
seeminglyrenderpassthroughlicensinginefficientatbest.Intheircomments,recordlabels
indicatedawillingnesstoeliminatethisaspectofsection115.See RIAASecondNotice
Commentsat19(Themajorrecordcompaniesgenerallysupportinprincipletheeliminationof
passthroughlicensing.).
945
Thesection112,114,and115licensescontainantitrustexemptionstoallowcopyrightowners
anduserstonegotiatecollectively,andthePROsarepermittedtodosoundertheconsent
decrees.See 17U.S.C.112(e)(2),114(e)(1),115(c)(3)(B).
946
SeeASCAPConsentDecree X;Ace Title Search,ASCAP,https://www.ascap.com/Home/ace

titlesearch/index.aspx(lastvisitedJan.29,2015);BMI Repertoire,BMI,http://repertoire.bmi.com/
startpage.asp(lastvisitedJan.29,2015);HFA,Songfile Search,SONGFILE,https://secure.harryfox.
com/songfile/public/publicsearch.jsp(lastvisitedJan.16,2015).
947
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U.S.CopyrightOffice
differenceisthatthepubliclyaccessibledatawouldbeavailableinamoresophisticated
databaseformatthatwouldfacilitateautomatedmatchingfunctions,bulklicensing
processes,andreconciliationofthirdpartydatabases.
MROswouldalsoberesponsiblefornotifyingtheGMROofanymembersthathad
exercisedoptoutrightsbyprovidingtherelevantoptoutinformation,includingwhere
adirectlicensemightbesought,forthecentraldatabasesopotentiallicenseeswould
knowwheretogoforlicenseauthority.Additionally,underrequirementsthatwouldbe
phasedinovertime,MROswouldneedtosupplytheISWCandovertime,theISNI
identifiersforeachoftheworkstheyrepresented.Aseveryoneappearstoagree,the
movetouniqueidentifiersasaprimarymeanstorecognizebothmusicalworksand
soundrecordingsisessentialtoanefficientlicensingsystem.
ButMROswouldnothavetosharealloftheirdataforpurposesofthepublicdatabase.
Forexample,therewouldbenoneedforanMROtoprovidecontactinformationforits
members(otherthanthosethatoptedout)sincetheMROwouldberesponsiblefor
distributingroyaltiesunderthelicensesitissued.Detailsaboutcontractual
arrangementsbetweenpublishersandtheirsongwritersthattheMROsmightneedfor
theirowndistributionpurposeswouldseemtobeunnecessarytoprovideforpublic
use.UndertheOfficesapproach,MROswouldonlyberequiredtofurnishsuch
informationaswouldbenecessarytofacilitateaccuratelicensingtransactionsandusage
reportinginasystemofmultipleMROs.Assuggestedbelow,thespecificdatatobe
suppliedcouldbesubjecttoregulatoryoversightandadjustedovertime.
2. The GMRO
EventhoughthepreponderanceoflicensingactivitywouldbecarriedoutbytheMROs
anddirectlylicensingpublishers,thehubofthenewlicensingstructurewouldbethe
GMRO.SimilartoSoundExchange,theGMRO(SongExchange?)wouldbeanon
profitentitydesignated,andregulated,bythegovernment.948TheGMROwouldbe
overseenbyaboardthatincludedrepresentativesfromboththemusicpublishingand
songwritercommunities.
Byvirtueofmaintainingauthoritativeandaccessibleownershipdata,theGMROwould
helptocoordinatelicensingandroyaltypaymentsacrosstheMROsandindividual
publishers.Butitwouldnotserveasacentralizedcollectionfacilityotherthanwith
respecttounidentifiedroyaltyrecipients.TheOfficebelievesthataddinganadditional
administrativelayertocoreroyaltycollectionanddistributionfunctionswouldaddtime
SoundExchangeisregulatedbytheCopyrightRoyaltyBoardasthedesignatedcollective.See,
e.g.37C.F.R.380.2(c),380.4.
948
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U.S.CopyrightOffice
andexpensetotheseprocessesandshouldbeavoidedifpossible.949Atthesametime,
theGMROwouldserveastherecipientforpaymentsonbehalfofunidentifiedowners.
a. DataRelated Responsibilities
TheGMROwouldingestdatafromMROsandotherauthoritativesourcestocreateits
masterdatabase.TheGMROdatabasewouldlistthepublishers,musicalworks,
percentagesharesandrightsrepresentedbythevariousMROs,alongwithprescribed
identifierssuchasISWCsandISNIs.Inaddition,thedatabasewouldflagoptout
publishers,thespecificrightsandworksthatwereoptedout,andprovidethe
publisherslicensingcontactinformation.
Inadditiontomusicalworkdata,itseemsthattheGMROcouldandshouldalso
incorporatesoundrecordingdataintothepublicdatabase,includingtracktitles,record
labels,featuredartists,playtimesandISRCs.ItistheOfficesunderstandingthat
SoundExchangecurrentlyhasidentificationandownershipinformationincluding
ISRCsforapproximately14millionsoundrecordings.950TheGMROcouldabsorbthis
datafromSoundExchange.ThroughSoundExchangescontinuingadministrationofthe
section112and114licenses,anISRCrequirementforremainingtracksaswellasthe
ISNIstandardcouldbephasedinunderthoselicenses,withtheongoingresultstobe
sharedwiththeGMRO.951
LikeSoundExchange,theGMROwouldplayanactiveroleingatheringmissingdata,
reconcilingconflictingdata,andcorrectingflaweddata.Itwouldneedtoestablisha
processtohandlecompetingownershipclaimsasnecessary.
ButperhapsmostimportantamongthedatarelatedresponsibilitiesoftheGMRO.
wouldbetogatherorgeneratematchesofmusicalworkswithsoundrecordings.
Thereissimplynoeasymeansforlicenseestoacquiregeneralizeddataidentifyingthe
musicalworksembodiedinindividualsoundrecordings.Someprivateentitiessuchas
HFAhavemadesubstantialprogressonthisfrontthroughacombinationofautomated
andmanualmatchingprotocols,butthereisnocomprehensivesourceforthis
information,andevenHFAhasyettomatchmillionsoftitles.952
SIRAtookasimilarapproachbyprovidingfordirectpaymenttotheindividualdesignated
agents.SIRA,H.R.5553.
949
950
SoundExchangeiscurrentlyexploringmakingitsdataavailabletoothers.See id.at5
(SoundExchangeisactivelyexploringmeansbywhichitmightprovideinterestedservicesa
meansofaccessing[itssoundrecording]dataforuseinidentifyingtoSoundExchangewith
greaterprecisiontherecordingstheyuseunderthestatutorylicenses.).
951
952
Tr.at217:02218:16(June23,2014)(ChristosP.Badavas,HFA).
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U.S.CopyrightOffice
Amatchingdatabasewouldrepresentahugeadvanceinmusiclicensing,asitwould
enabledigitalservicesefficientlytoidentifymusicalworksandtheirownersbasedon
thetrackstheyareusing.Undoubtedlyitisasignificantundertaking,butgivenan
appropriatelevelofresourcesitwouldseemtobeachievable,atleastwithrespecttothe
mostfrequentlyusedsongs.AsHFAreports,12millionsoundrecordingsaccountfor
almost95%ofusageinatypicaldigitalmusicservice.953Happily(andnotsurprisingly),
itisthemostcommerciallyvaluablesoundrecordingsandmusicalworksthattendtobe
theeasiesttoidentifyandassociatewithoneanother.
Onthelicenseesideoftheequation,wheneveranISWC,IRSCorISNI(orother
prescribedidentifier)appearedinthedatabase,itwouldbearequiredelementina
licenseesreportunderasection114or115license.Theconsistentuseofthesestandards
wouldundoubtedlyfacilitatetheGMROseffortstomatchmusicalworkstosound
recordingsanddistributeroyaltiestotheirowners.
Finally,asnotedabove,thesongdataandlicensinginformationcollectedbytheGMRO
wouldbepubliclyaccessiblenotonlyintheformofindividualrecordsthrougha
lookupstyledatabase,butalsoinbulkformand/orviaAPIsthatwouldallow
licenseestheabilitytouseittoupdatetheirrecordsorperformmatchingorother
functionsrelatingtotheirlicensingneeds.
b. Default Licensing and Payment

NotwithstandingtheGMROdatabaseandotheravailableresources,therewouldstillbe
works(andsharesofworks)forwhichtheownerswerenotidentified.954TheGMRO
wouldthereforealsoserveasthedefaultlicensingandcollectionagentformusical
works(orsharesofworks)thatlicenseeswereunabletoassociatewithanMROoropt
outpublisher.Servicesrelyingonblanketperformanceand/ormechanicallicensesfor
musicalworksthathadusagebasedpaymentobligationswouldtransmitrecordsofuse
forunmatchedworks,alongwithassociatedpayments,totheGMRO.955TheGMRO
953
Thisisaparticularconcernwithrespecttonewreleases,aspublisherandsongwriter
disagreementsovertheirrespectiveownershipsharesinsongsoftendelaythefinalizationof
mechanicallicensesformonthsorevenyearsaftertherecordisreleased.Tr.at340:05341:14
(June23,2014)(AndreaFinkelstein,SME).
954
SinceroyaltyobligationsmightvaryamongMROsandpublishers,thedefaultpayments
wouldneedtobemadeinanamountsufficienttocoverthehighestpotentialratepayabletoany
entitywithwhichthelicenseehadalicensingarrangement.Insomecases,ablanketlicense
mightrequirepaymentofasetamountforthereportingperiodinquestionregardlessofusage
(forexample,afixedpercentageoftheservicesrevenues,asinthecaseofASCAPslicensewith
Pandora),withtheroyaltypooltobeallocatedbythecollectingagent.Insuchacase,there
wouldbenoneedtopayintotheGMRO,andanyreportingissueswouldneedtobeaddressed
bytheMRO.
955
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U.S.CopyrightOffice
wouldthenattempttoidentifytheMROorindividualrightsowneritselfand,if
successful,paytheroyaltiesout.956Ifunsuccessfulinitsresearchefforts,theGMRO
wouldaddtheusagerecordtoapublicunclaimedroyaltieslistandholdthefundsfor
someperiodoftimee.g.,threeyearstoseeifaclaimantcameforward.Asisthecase
withSoundExchange,afterthatperiod,theGMROcoulduseanyremainingunclaimed
fundstohelpoffsetthecostsofitsoperations.Suchadefaultlicensingandpayment
optionwouldprovideprotectionforlicenseesbyreportingunmatchedworksand
payingtheassociatedroyaltiestotheGMRO,theycouldavoidliabilityforinfringement
forthoseuses.
Butanysuchsystemwouldrequireappropriateincentivestoensurethatbothlicensees
andpublisherswereholdinguptheirrespectiveendsofthebargain.Settingasideany
generalfundingobligationsinrelationtotheGMRO,whicharediscussedbelow,the
Officebelievesthatlicenseesshouldberequiredtopayanadministrativefee(perhaps
assessedonapertitlebasis)foranyunmatchedusesreportedtotheGMRO.957In
additiontoencouragingduediligenceonthepartoflicenseestolocatemissing
informationbeforeresortingtothedefaultsystem,suchfeeswouldhelpunderwritethe
GMROseffortstolocateandpayrightsholders.
Atthesametime,MROsandtheirmembersshouldalsobeencouragedtomaintain
completeandreliabledatawiththeGMRO.Theprimaryincentivetodoso,ofcourse,
wouldbetofacilitatepromptandaccuratepaymentsbylicensees.Inthisregard,the
Officebelievesitcouldbeusefultoestablishphasedincompliancetargetsoveraperiod
ofseveralyearsfortheprovisionofthemostcriticalpublisherdata,includingmissing
ISWCs,totheGMRO.958If,afteranappropriatereviewofthesituationandan
AnydifferencebetweentheroyaltiespaidtotheGMROandtheactualrateofasubsequently
identifiedpublishercouldbecontributedtotheGMROtooffsetcosts.Inthecaseofapublisher
notaffiliatedwithanMROandhencenotsubjecttoanyrateagreement,thepublishershould
receivethelowestpotentialratethatthelicenseemightpayforthatuseandtheGMROcouldalso
deductareasonableadministrativefeenotgreaterthananyfeecurrentlychargedbyanyofthe
MROs.ThislatterrulewouldincentivizepublisherstoaffiliatewithanMROoftheirchoice
ratherthanrelyonthemuchlessefficientGMROclaimsprocedure.
956
AsomewhatanalogousfeeiscurrentlyrequiredforthefilingofanNOIwiththeOfficeunder
section115inlieuofservingitonalicenseewhenthelicenseecannotbefoundintheOffices
records(thoughnoroyaltypaymentisrequired).See 37C.F.R.201.3(e)(1).Asnotedabove,
largescalelicenseesappeartobereluctanttoavailthemselvesofthisprocessduetothefiling
fees(whichreflectthecostsincurredbytheOfficeinadministeringthesenotices,asper17U.S.C.
708(a)).TheleveloftheadministrativefeethatwouldbeassessedbytheGMROwhich
wouldreceivemoregeneralfundingfromusers,asdiscussedbelowwouldneedtobecarefully
assessedinrelationtoitspurpose.
957
Bywayofillustration,inyearone,20%ofworkslistedbyanMROmightberequiredto
includetheISWC;inyeartwo,40%;andsoonuptoneartotalcompliance.
958
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U.S.CopyrightOffice
opportunitytorectifyconcerns,anMROwerefoundtofallshortofthemark,any
licenseerequiredtopaytheGMROsadministrativefeeforunmatchedworkstothat
publisherwouldbeentitledtorecoupsomeportionofthatfee(sayhalf)fromitsroyalty
paymentstothatpublisherpendingcorrectionoftheproblem.
c. Resources and Funding

Aquestionthatwillinevitablyariseinanydiscussionconcerninganoverhaulofour
musiclicensingsystemishowthenewsystemmorespecifically,thestartupcostsand
variousactivitiesoftheGMROwouldbefunded.TheOfficehassomesuggestionsto
offeronthispoint.
First,theCopyrightOfficebelievesthatbothcopyrightownersandusersshouldbear
thecostsofthenewsystem,asbothgroupswillshareinitsbenefits.Traditionally,
publishersandsongwritershaveunderwrittenmuchofthecostoflicensing
performanceandmechanicalrightsanddistributingroyaltiesthroughcommissionspaid
tothePROsandHFA.Butrecordlabelsanddigitalserviceshavealsobornesignificant
administrativecostsingatheringandcompilingthedatanecessarytoobtainandreport
underlicenses.
AsenvisionedbytheOffice,theGMROwouldbuildandmaintainapublicdatabaseof
ownershipandlicensinginformationformusicalworksandsoundrecordings.Aspart
ofthisobligation,itwouldberesponsibleformatchingsoundrecordingdatatomusical
works.TheGMROwouldalsoberesponsibleforcollectinganddistributingroyalties
forunclaimedworks.Thesearesubstantialundertakings.Somelicenseeshave
expressedwillingnesstohelpfundamoreworkablesystem.959TheOfficebelievesthat
publishersandsongwriterswillalsoneedtocontribute,althoughmuchoftheir
contributionmightbeintheformofshareddata.
Asexplainedabove,undertheOfficesproposal,everyMRO,aswellasSoundExchange,
willberequiredtocontributekeyelementsofdatatocreateandmaintainacentralized
musicdatabase.MROswillberesponsibleforallocatinganddistributingthevast
majorityofroyalties(andwillchargecommissionstopublishersandsongwritersfor
thoseservices).Inexchangeforthesecontributionsonthepartofcopyrightowners,the
Officebelievesthattheprimaryfinancialsupportforthedatarelatedanddefault
licensingactivitiesoftheGMROshouldcomefromfeeschargedtousersofthesection
112,114,and115licenses.
See, e.g., DiMASecondNoticeCommentsat5(suggestingthatthegovernmentdesignatea

smallportionoflicensefeespaidbylicenseestocovercosts);RIAAFirstNoticeCommentat22
(Recordcompaniesarepreparedtocontributeinformationconcerningnewworks,and
potentiallyashareofstartupcosts.).
959
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U.S.CopyrightOffice
AlthoughmusicuserswouldbepayingroyaltiesdirectlytoMROsandindividual
publishersandtoSoundExchangeaswelltheywouldhaveaseparateobligationto
payalicensingsurchargetotheGMROinrecognitionofthevalueitwouldbeproviding
tothelicenseecommunity.Thelicensingsurchargemight,forexample,beassessedasa
smallpercentageofroyaltiesduefromthelicenseeunderitssection112,114,and/or115
statutorylicenses,includinganydirectdealsforequivalentrights.Inordertofund
startupcosts,licenseescouldperhapscontributealumpsumagainstfuturesurcharge
assessments,toberecoupedovertime.
ThesurchargetobepaidbystatutorylicenseescouldbedeterminedbytheCRBthrough
aperiodicadministrativeprocessbasedontheGMROscosts,andwouldbeoffsetby
othersourcesoffunding.Forexample,inadditiontothegenerallyapplicable
surcharge,asexplainedabove,theOfficebelievesthatindividuallicenseesshouldbe
chargedanadministrativefeeinconnectionwithreportingandpayingunattributed
usestotheGMRO.960PublishersnotaffiliatedwithanMROwhoclaimedworksfrom
theunmatchedlistwouldalsobeexpectedtopayaprocessingfee,astheywouldatan
MRO.NonstatutorylicenseescouldberequiredtopaytheGMROsreasonablecostsfor
thebulkprovisionofdata.Suchfeeswhichwouldhelptooffsetthecostsofthe
GMROcouldbeconsideredbytheCRBinestablishingthesurcharge.
Anadditionalsourceoffundingwouldbeanyroyaltiesthatremainedunclaimedby
publishersaftertheprescribedholdingperiod(perhapsthreeyears).Suchunattributed
moniesorblackboxfundswouldalsobeavailabletooffsettheGMROs
administrativecosts.AswiththeGMROsothersourcesofincome,thesefunds,too,
couldbeconsideredbytheCRBinestablishingthelicensingsurcharge.961
3. The CRB
a. New Ratesetting Protocol
UndertheOfficesproposal,ratesettingbytheCRBwouldshiftfromafiveyearcycleto
asystemunderwhichtheCRBwouldstepinonlyasnecessarythatis,onlywhenan
MROorSoundExchangeandlicenseecouldnotagreeonarate.
Theunfortunaterealityisthatthecostsofratesettingareveryhigh,whetherthe
proceedingoccursinfederalcourtorbeforeanadministrativetribunal.TheOffice
believesthatthecurrentapproachunderthesection112,114,and115licensesunder
whichratesarerequiredtobeestablishedforthefullspectrumofusesfortheupcoming
fiveyearsisprobablynotthemostefficientuseofresources.Suchanapproach
Asnotedabove,anMROthatfailedtocontributeadequatedatatotheGMROcouldbe
requiredtoabsorbsomeportionofsuchadministrativefees.
960
IftheblackboxfundswereevertoexceedtheGMROscosts,theexcesscouldbedistributedto
publishersbytheGMRObasedonamarketsharebasedallocationprocess.
961
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U.S.CopyrightOffice
presentsthenontrivialproblemofhowtoidentify,evaluateandpricestillnascent
businessmodels.Eveniftheyareidentified,someoftheseusesmightbeeasilysettled
outsideofthecontextofaCRBproceeding.Inthecaseofexistingmodels,theextant
ratesmaybesufficientlysatisfactoryforbothsidestocontinueineffect.Greater
flexibilityintheratesettingprocesswouldallowtheratesettingbodytoaddressonly
thoseratesthatwereworthwhiletolitigate.
Insupportofitsproposal,theOfficeobservesthatASCAPandBMIhaveoperated
undersuchanad hoc systeminthefederalratecourts,withonlyarelativelysmall
numberoftheirratesactuallylitigated.AlikemindedCRBapproachcouldyieldmore
voluntaryagreementsandlesslitigation.Further,licenseeswouldnolongerhaveto
shoehornthemselvesintoanexistingratecategorytotakeadvantageofstatutory
licensing,becauseMROlicensescouldbespecificallytailoredtoaddressthenuancesof
thebusinessmodelathand.
Lastbutnotleast,itisdifficulttoseehowanintegratedlicensingframeworksuchas
thatproposedbytheOfficecouldfunctionundertwodifferentratesettingparadigms,as
existintheirseparateworldstoday.Inordertobundleperformanceandmechanical
licensingor,asdiscussedbelow,soundrecordingandmusicalworkrightsinan
efficientmanner,thereshouldbeaunifiedratesettingprocess.TheCRBwouldface
enormousadministrativechallengesifithadtoadministerbothperiodicandad hoc
ratesettingproceedingssimultaneously.962
b. AllIn Rates for Noninteractive Streaming

Duringthestudy,variouscommentingpartiesfloatedthesuggestionofallinblanket
licensingthatwouldencompassbothsoundrecordingandmusicalworkrights.963Our
currentframeworkpresentsseeminglyinsuperablehurdlestoachievingwhatmany
viewasatantalizinggoal.EvenundertheframeworkproposedbytheOfficewhich
notwithstandingpublisheroptoutrightsstillcontemplatesratesettingformusical
worksthathasnoequivalentonthesoundrecordingsideitwouldbedifficultto
implementallinratesonabroadbasis.
Inthisregard,CongressmightalsowishtoamendthestatutoryframeworkfortheCRBto
allowforgreaterflexibilityinstaffing.Currently,thestatuteishighlyspecific,inthatitprovides
forthreefulltimestaffmembers:onetobepaidnomorethanthebasicrateforlevel10ofGS15
oftheGeneralSchedule;onetobepaidbetweenthebasicrateforGS13andlevel10ofGS14;
andonetobepaidbetweenthebasicrateforGS8andlevel10ofGS11.17U.S.C.802(b),(e)(2).
Especiallyifitsdutieswereexpandedtoincludeadditionallicensingactivitiesandfeesetting
responsibilities,theCRBwouldseeminglybebetterservedwithastatutethatprovidedmore
discretionwithrespecttothenumberandseniorityofthelegalstaffthatassistthethreeJudges.
962
See, e.g.,RIAAFirstNoticeCommentsat1417(proposingablanketlicensingsolutionforall
rightsimplicatedwhenusingmusicalworks);Tr.at194:0518(June4,2014)(ScottSellwood,
Google/YouTube)(Icertainlyliketheideaofanallinvaluationofthemusiccopyright.).
963
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U.S.CopyrightOffice
Inonearea,howeverthelicensingofnoninteractivestreamingusesbyinternet
services,satelliteandterrestrialradio,andotherssuchamodelmightbeachievable.
HeretheOfficehassuggestedthatgovernmentsupervisionofthepublicperformance
rightbemovedfromthefederalratecourtstotheCRB.Accordingly,bothsound
recordingownersandmusicalworkownerswouldbesubjecttoCRBratesettingtothe
extenttheywereunabletonegotiateagreementswithdigitalproviders.TheOffice
believesthatanysuchproceedingscouldpotentiallybecombined.
TakingthesuggestionoftheRIAA,forexample,recordlabelsandmusicpublishers
couldagreeupfronttoasplitofroyaltiesasbetweenthemforthecategoryofusetobe
litigated.964Theycouldthenparticipatejointlyintheratesettingproceedingvisvisthe
licensee.ThelicenseesfocusbeforetheCRBwouldthusbeonitstotalroyalty
obligation,ratherthantheparticularamountstobepaidtolabelsorpublishers.Even
barringanupfrontagreementbetweenthelabelsandpublishers,ratesettingforthe
serviceinquestionmightstillproceedonanallinbasis,withtheCRBtoestablishthe
splitbetweensoundrecordingsandmusicalworksinaseparatephaseoftheproceeding
thatdidnotincludethelicensee.
c. GMRO Surcharge
Asnotedabove,undertheOfficesproposal,theGMROwouldbefundedinpartbya
licensingsurchargetobepaiddirectlybylicenseestotheGMRO.TheOfficebelieves
thattheCRB,withitsinhouseeconomicexpertise,wouldbewellequippedto
determinethesurchargethroughaperiodicreviewprocess.Thatprocesswouldbe
conductedseparateandapartfromanyratesettingactivities.Indeed,animportant
elementofsuchaproceedingwouldbetoprecludeanyconsiderationofroyaltyratesin
establishingthelicensingsurcharge(andviceversa).Thesurchargewouldbeset
independently,basedonlicenseedataandtheGMROscostsandcapitalneeds.965
d. Procedural Improvements
InadditiontothesubstanceoftheCRBsratesettingdeterminations,anumberof
seasonedstakeholdersaddressedtheproceduralrulesthatcurrentlygoverntheCRBs
work.TheCRBisconstrainedbyproceduralmandatessetforthinsection803ofthe
CopyrightAct,whichgoverntheinitiationandconductofratesettingproceedings,
includingsuchmattersasfilingrulesforparticipants,thetimingandcontentofdirect
cases,thehandlingofvariousevidentiaryanddiscoverymatters,andsettlement
RIAAFirstNoticeCommentsat1517.Anysuchagreementconcerningtheroyaltysplit
wouldpresumablyneedtoaddressthepartiesobligationstoeachotherinrelationtoa
settlementratherthanalitigatedoutcome.
964
AsitdoesinCRBproceedingstoday,inconsideringappropriatefees,theCRBcouldimpose
safeguardstoprotectagainstpublicdisseminationofconfidentialbusinessinformation.
965
199
U.S.CopyrightOffice
negotiations.966Thissortofproceduraldetailisunusualinafederalstatutoryscheme
andismoretypicallylefttoregulationorthediscretionofthetribunal.
StakeholderscomplainthatthecurrentCRBsystemisundulyburdensomeand
expensive.Currently,ratesettingparticipantsarerequiredtoputintheirwrittendirect
statementbeforetheyconductdiscoverythatis,theyarerequiredtoconstructand
supporttheirrateproposalstotheCRBwithoutthebenefitofeconomicinformation
fromtheotherside.967Thisiscompletelycounterintuitivetoanyonefamiliarwith
ordinarylitigationpractice.
Inkeepingwiththisconstruct,ratesettingproceedingsaredividedintoseparatedirect
andrebuttalphases,withdiscoveryconductedaftereachphase.968Partiesmayseekto
amendtheirrateproposalsinresponsetowhattheylearnindiscovery.969Inpractical
effect,thismeanstherearetwotrialproceedings,withoverlappingargumentsand
evidence,insteadofone.Asmightbeexpected,stakeholderswouldprefertohavethe
issuesfortrialfullyjoinedandaddressedinsingleproceeding.TheOfficeis
sympathetictotheseconcernsandbelievestheCRBprocessshouldbemodifiedsoit
morecloselyresemblestypicallitigation.Ashasbeensuggestedbysome,thiscould
includegreaterrelianceontheFederalRulesofCivilProcedureandFederalRulesof
Evidence,albeitwithappropriatemodifications(suchasrelaxationofhearsayrules).970
Multifactorratesettingstandardsalsocontributetothelengthandexpenseof
proceedings,aspartiesfeelcompelledtofurnishevidenceandargumentoneach
statutorilyprescribedfactor.Amovetoasimplerstandardsuchaswilling
buyer/willingsellerperhapsunembellishedbyspecificconsiderations(incontrastto
thestandardascurrentlyembodiedinsection114971)mightalsohelptostreamlinethe
ratesettingprocessbypermittingeachsidetofocusonthemostsalientaspectsoftheir
case.
ManyCRBparticipantscomplainedthattheexistingprocessdoesnotfacilitateearly
settlement.Inorderforasettlementtobethebasisforanindustrywiderate,itmustbe
adoptedbytheCRB.972TheCRBdoesnotappearalwaystobecomfortableinadopting
settlementagreementsthatsettlelessthantheentireproceedingforexample,a
settlementamongfewerthanallparticipantswhiletherestoftheproceedingremains
See generally 17U.S.C.803.
966
Id.803(b)(6)(C)(ii).
967
Id.803(b)(6)(C)(i)(ii).
968
Id.803(b)(6)(C)(i).
969
See id.803(b)(6)(C)(iii)(allowinghearsaytobeadmitteduponCRBdiscretion).
970
Id.114(f)(2)(B).
971
Id.801(b)(7).
972
200
U.S.CopyrightOffice
pending.973Andtherecordshowsthatparticipantsfeelobligatedtocontinuelitigating
untilasettlementisadopted.974Thisisnotanefficientsystem.TheOfficeagreesthat
thisshouldberectifiedbyclarifyingthestatutoryprovisionsgoverningtheCRBtofavor
partialsettlementsatanystageoftheproceedingwhenrequestedbythesettling
participants.975
Finally,whiletheOfficebelievesthatthehighlevelproceduralconcernsdescribed
shouldbeaddressedbylegislativeamendments,Congressmayalsowishtoremove
unnecessaryproceduraldetailsinthestatutethatarebetterlefttoregulation.TheCRB
shouldhavethelatitudetodevelopspecificproceduralrulesandmodifythemas
appropriatewithinthebasicparameterssetforthinthestatute.
4. Regulatory Implementation
ShouldCongressdecidetorestructurethemusiclicensingsystem,theOfficebelieves
thatitmightbemostproductiveforanyresultinglegislationtosetouttheessential
elementsoftheupdatedsystemandleavetheparticularstoregulation.Suchaconstruct
wouldlikelybemorerealistictoenactthananexhaustivestatutoryprescription
especiallyinthecaseofmusiclicensing,wheretheparticularscanbeoverwhelming.In
additiontowhateverlegislativeadvantagesitmightconfer,amoregeneralapproach
wouldhaveaddedbenefitofflexibility,sinceregulationscanbeadjustedovertimeto
addressnewdevelopmentsandunforeseencontingencies.
TheCRBhasoccasionallyadoptedsettlementsresolvingsomebutnotallrateconcerns.See,
e.g.,AdjustmentofRatesandTermsforPreexistingSubscriptionandSatelliteDigitalAudioRadio
Services,72Fed.Reg.71,795(Dec.19,2007);DeterminationofRatesandTermsforPreexisting
SubscriptionServicesandSatelliteDigitalAudioRadioServices,73Fed.Reg.4080.Butadoption
ofpartialsettlementsisnotthenorm.
973
See, e.g.,Tr.at122:1522(June23,2014)(ColinRushing,SoundExchange)(Butitwasthis
group,CollegeWebcasters,Inc.Weenteredintoasettlementwiththem.Wealsodida
settlementwithNAB.NeitherofthesesettlementswereactuallyadoptedbytheCRBuntilthe
veryendoftheproceeding.Andsowefoundourselvesunsureofwhat,youknow,whetherthe
settlementswere,actually,goingtobeadopted.);Tr.at99:16100:03(June16,2014)(Brad
Prendergast,SoundExchange)(thecurrentsystemleavesalotofpartiesstillinthelitigation
proceeding,whentheydrathernotbe);Tr.at129:17130:03(June23,2014)(StevenMarks,
RIAA)(IalsothinkthattheCRB,itwouldbenicetohave,maybe,somesettimesfortheCRBto
ruleonsettlementsthatareproposed.Wehad,ourlastmechanicalsettlementthatwasoffered,a
delayofalmostayear.).
974
Notably,thisproblemwouldalsolikelybeamelioratedbyamovetoanasneeded
ratesettingsystemasrecommendedbytheOffice,whereratedeterminationswouldbindonly
theparticipantstotheproceeding(notwithstandingtheirpotentialinfluenceonothermarket
actors).Suchproceedingswouldfocusonnarrowerdisputesandshouldthereforebeeasierto
resolvethanproceedingscoveringamultitudeofratesandstakeholders.
975
201
U.S.CopyrightOffice
Logically,theCopyrightOfficeshouldhaveprimaryregulatoryresponsibilityforthe
manyissuesthatwouldneedtobeaddressedinimplementinganewstatutory
framework.Forexample,theOfficecouldestablishrulesfortheprovisionofdatatothe
GMRO,licenseereportingrequirements,andcollectiveaudits.Itcouldalsopromulgate
technicalrequirementsforthestatutorylicenses,withthepowertoupdatesuch
specificationsasnecessary.
TheCRB,too,wouldhaveregulatoryresponsibilities.Inadditiontoitsperiodicreview
ofthesurchargetobeassessedbytheGMRO,theCRBwouldenactrulesthatwould
governthefilingandconductoftheratesettingproceedingsitwouldoversee.Likethe
CopyrightOffice,theCRBshouldhavetherequisiteregulatoryauthoritytocarryoutits
responsibilities.
5. Further Evaluation
ShouldCongresschoosetoembarkuponaseriesofchangestoourlicensingsystem
suchasthosedescribedabove,theOfficerecommendsthatthenewsystembeevaluated
bytheCopyrightOfficeafterithasbeenoperationforaperiodofseveralyears.
Assumingthatthenewlicensingframeworkincludesanoptoutmechanismas
describedabove,theefficacyofthatprocesswouldbeofparticularinterest.Iftheopt
outsystemwerefoundtobehavingadverseeffectsonthemarketplace,Congresscould
considernarrowingthoserights.If,ontheotherhand,theoptoutoptionwereworking
well,Congressmightwishtoexpandittoothercategories.
202
co p y r i g h t
appendix a
.s.
co p y r i g h t
o f f i c e
a n d
t h e
m u s i c
federal register notices
m a r k e t p l a c e
14739
Federal Register / Vol. 78, No. 51 / Monday, March 17, 2014 / Notices
search_cfm under the searchable listing
of determinations or by calling the
Office of Trade Adjustment Assistance
toll free at 8883656822.
Signed at Washington DC, this 20th day of
February 2014.
Hope D. Kinglock,
Certifying Officer, Office of Trade Adjustment
Assistance.
[FR Doc. 201405760 Filed 31414; 8:45 am]
BILLING CODE 4510FNP
DEPARTMENT OF LABOR
Employment and Training
Administration
Investigations Regarding Eligibility To
Apply For Worker Adjustment
Assistance
Petitions have been filed with the
Secretary of Labor under Section 221(a)
TAW
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Signed at Washington, DC, this 20th day of

February 2014.
Hope D. Kinglock,
Assistance.
Appendix13 TAA Petitions Instituted

Between 2/10/14 and 2/14/14
Date of
institution
Location
Avery Dennison (Company) .................................................

Fresenius Medical Care NA (Workers) ................................
IBM (State/One-Stop) ...........................................................
Computer Sciences Corporation (State/One-Stop) ..............
EPIC Technologies, LLC (Company) ...................................
Southside Manufacturing (Workers) .....................................
Woodcraft Industries (Company) ..........................................
Sun Edison (previously MEMC) (State/One-Stop) ...............
FLSmidth Spokane Inc (Workers) ........................................
GE Hitachi Nuclear Energy (Company) ...............................
Allstate Insurance Company (Workers) ...............................
Time Machine, Inc. (Company) ............................................
General Electric (GE) (Union) ..............................................
Clinton, SC ............................
Livingston, CA .......................
San Jose, CA ........................
Oakland, CA ..........................
El Paso, TX ...........................
Blairs, VA ..............................
Belletonte, PA .......................
St. Peters, MO ......................
Meridian, ID ...........................
Canonsburg, PA ....................
Roanoke, VA .........................
Polk, PA ................................
Ft. Edward, NY .....................
in light of technological and other

developments that impact the creation,
dissemination, and use of copyrighted
works.
LIBRARY OF CONGRESS
Written comments are due on or

before May 16, 2014. The Office will be
announcing one or more public
meetings to address music licensing
issues, to take place after written
comments are received, by separate
notice in the future.
DATES:
Copyright Office
[Docket No. 201403]
Music Licensing Study: Notice and

Request for Public Comment
The United States Copyright

Office announces the initiation of a
study to evaluate the effectiveness of
existing methods of licensing music. To
aid this effort, the Office is seeking
public input on this topic. The Office
will use the information it gathers to
report to Congress. Congress is currently
conducting a review of the U.S.
Copyright Act, 17 U.S.C. 101 et seq., to
evaluate potential revisions of the law
SUMMARY:
18:45 Mar 14, 2014
Jkt 232001
All comments shall be

submitted electronically. A comment
page containing a comment form is
posted on the Office Web site at
http://www.copyright.gov/docs/
musiclicensingstudy. The Web site
interface requires commenting parties to
complete a form specifying their name
and organization, as applicable, and to
upload comments as an attachment via
a browser button. To meet accessibility
standards, commenting parties must
upload comments in a single file not to
exceed six megabytes (MB) in one of the
following formats: The Portable
ADDRESSES:
Copyright Office, Library of
Congress.
ACTION: Notice of Inquiry.
AGENCY:
tkelley on DSK3SPTVN1PROD with NOTICES
Assistance, at the address shown below,

not later than March 27, 2014.
Interested persons are invited to
submit written comments regarding the
subject matter of the investigations to
the Director, Office of Trade Adjustment
Assistance, at the address shown below,
not later than March 27, 2014.
The petitions filed in this case are
available for inspection at the Office of
the Director, Office of Trade Adjustment
Assistance, Employment and Training
Administration, U.S. Department of
Labor, Room N5428, 200 Constitution
Avenue NW., Washington, DC 20210.
Subject firm (petitioners)
[FR Doc. 201405758 Filed 31414; 8:45 am]
VerDate Mar<15>2010
of the Trade Act of 1974 (the Act) and

are identified in the Appendix to this
notice. Upon receipt of these petitions,
the Director of the Office of Trade
Adjustment Assistance, Employment
and Training Administration, has
instituted investigations pursuant to
Section 221(a) of the Act.
The purpose of each of the
investigations is to determine whether
the workers are eligible to apply for
adjustment assistance under Title II,
Chapter 2, of the Act. The investigations
will further relate, as appropriate, to the
determination of the date on which total
or partial separations began or
threatened to begin and the subdivision
of the firm involved.
The petitioners or any other persons
showing a substantial interest in the
subject matter of the investigations may
request a public hearing, provided such
request is filed in writing with the
Director, Office of Trade Adjustment
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Document File (PDF) format that

contains searchable, accessible text (not
an image); Microsoft Word;
WordPerfect; Rich Text Format (RTF); or
ASCII text file format (not a scanned
document). The form and face of the
comments must include both the name
of the submitter and organization. The
Office will post the comments publicly
on the Offices Web site in the form that
they are received, along with associated
names and organizations. If electronic
submission of comments is not feasible,
please contact the Office at 202707
8350 for special instructions.
FOR FURTHER INFORMATION CONTACT:
Jacqueline C. Charlesworth, General

Counsel and Associate Register of
Copyrights, by email at jcharlesworth@
loc.gov or by telephone at 202707
8350; or Sarang V. Damle, Special
Advisor to the General Counsel, by
email at sdam@loc.gov or by telephone
at 2027078350.
SUPPLEMENTARY INFORMATION:
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14740
I. Background
Congress is currently engaged in a
comprehensive review of the U.S.
Copyright Act, 17 U.S.C. 101 et seq., to
evaluate potential revisions to the law
in light of technological and other
developments that impact the creation,
dissemination, and use of copyrighted
works. The last general revision of the
Copyright Act took place in 1976
(Copyright Act or Act) following a
lengthy and comprehensive review
process carried out by Congress, the
Copyright Office, and interested parties.
In 1998, Congress significantly amended
the Act with the passage of the Digital
Millennium Copyright Act (DMCA) to
address emerging issues of the digital
age. Public Law 105304, 112 Stat. 2860
(1998). While the Copyright Act reflects
many sound and enduring principles,
and has enabled the internet to flourish,
Congress could not have foreseen all of
todays technologies and the myriad
ways consumers and others engage with
creative works in the digital
environment. Perhaps nowhere has the
landscape been as significantly altered
as in the realm of music.
Music is more available now than it
has ever been. Today, music is delivered
to consumers not only in physical
formats, such as compact discs and
vinyl records, but is available on
demand, both by download and
streaming, as well as through
smartphones, computers, and other
devices. At the same time, the public
continues to consume music through
terrestrial and satellite radio, and more
recently, internet-based radio. Music
continues to enhance films, television,
and advertising, and is a key component
of many apps and video games.
Such uses of music require licenses
from copyright owners. The
mechanisms for obtaining such licenses
are largely shaped by our copyright law,
including the statutory licenses under
Sections 112, 114, and 115 of the
Copyright Act, which provide
government-regulated licensing regimes
for certain uses of sound recordings and
musical works.
A musical recording encompasses two
distinct works of authorship: The
musical work, which is the underlying
composition created by the songwriter
or composer, along with any
accompanying lyrics; and the sound
recording, that is, the particular
performance of the musical work that
has been fixed in a recording medium
such as CD or digital file. The methods
for obtaining licenses differ with respect
to these two types of works, which can
beand frequently areowned or
managed by different entities.
VerDate Mar<15>2010
18:45 Mar 14, 2014
Jkt 232001
Songwriters and composers often assign

rights in their musical works to music
publishers and, in addition, affiliate
themselves with performing rights
organizations (PROs). These
intermediaries, in turn, assume
responsibility for licensing the works.
By contrast, the licensing of sound
recordings is typically handled directly
by record labels, except in the case of
certain types of digital uses, as
described below.
Musical WorksReproduction and
Distribution. Under the Copyright Act,
the owner of a musical work has the
exclusive right to make and distribute
phonorecords of the work (i.e., copies in
which the work is embodied, such as
CDs or digital files), as well as the
exclusive right to perform the work
publicly. 17 U.S.C. 106(1), (3). The
copyright owner can also authorize
others to engage in these acts. Id. These
rights, however, are typically licensed
in different ways.
The right to make and distribute
phonorecords of musical works (often
referred to as the mechanical right) is
subject to a compulsory statutory
license under Section 115 of the Act.
See generally 17 U.S.C. 115. That
licenseinstituted by Congress over a
century ago with the passage of the 1909
Copyright Actprovides that, once a
phonorecord of a musical work has been
distributed to the public in the United
States under the authority of the
copyright owner, any person can obtain
a license to make and distribute
phonorecords of that work by serving a
statutorily compliant notice and paying
the applicable royalties. Id.
In 1995, Congress confirmed that a
copyright owners exclusive right to
reproduce and distribute phonorecords
of a musical work, and the Section 115
license, extend to the making of digital
phonorecord deliveries (DPDs)that
is, the transmission of digital files
embodying musical works. See Digital
Performance Right in Sound Recordings
Act of 1995 (DPRSRA), Public Law
10439, sec. 4, 109 Stat. 336, 34448; 17
U.S.C. 115(c)(3)(A).1 The Copyright
Office has thus interpreted the Section
115 license to cover music downloads
(including ringtones), as well as the
server and other reproductions
necessary to engage in streaming
activities. See In the Matter of
Mechanical and Digital Phonorecord
1 Under the terms of Section 115, a record
company or other entity that obtains a statutory
license for a musical work can, in turn, authorize
third parties to make DPDs of that work. See 17
U.S.C. 115(c)(3). In such a pass-through situation,
the statutory licensee is then responsible for
reporting and paying royalties for such third-party
uses to the musical work owner.
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Delivery Rate Adjustment Proceeding,

Docket No. RF 20061 (Oct. 16, 2006),
ringtone-decision.pdf; Compulsory
License for Making and Distributing
Phonorecords, Including Digital
Phonorecord Deliveries, 73 FR 66173
(Nov. 7, 2008).
Licenses under Section 115 are
obtained on a song-by-song basis.
Because a typical online music service
needs to offer access to millions of songs
to compete in the marketplace,
obtaining the licenses on an individual
basis can present administrative
challenges.2 Many music publishers
have designated the Harry Fox Agency,
Inc. as an agent to handle such song-bysong mechanical licensing on their
behalf.
The royalty rates and terms for the
Section 115 license are established by
an administrative tribunalthe
Copyright Royalty Board (CRB) 3
which applies a standard set forth in
Section 801(b) of the Act that considers
four different factors. These include:
The availability of creative works to the
public; economic return to the owners
and users of musical works; the
respective contributions of owners and
users in making works available; and
the industry impact of the rates.4
The Section 115 license applies to
audio-only reproductions that are
primarily made and distributed for
private use. See 17 U.S.C. 101, 115.
Reproductions and distribution of
musical works that fall outside of the
Section 115 licenseincluding synch
uses in audiovisual media like
2 Concerns about the efficiency of the Section 115
licensing process are not new. For instance, in
2005, then-Register of Copyrights Marybeth Peters
testified before Congress that Section 115 had
become outdated, and made several proposals to
reform the license. See Copyright Office Views on
Music Licensing Reform: Hearing Before the
Subcomm. on Courts, the Internet, and Intellectual
Property of the H. Comm. on the Judiciary, 109th
Cong. 49 (2005). In 2006, the House Judiciary
Committees Subcommittee on Courts, the Internet,
and Intellectual Property forwarded the Section 115
Reform Act (SIRA) to the full Judiciary
Committee by unanimous voice vote. See H.R. 5553,
109th Cong. (2006). This bill would have updated
Section 115 to create a blanket-style license. The
proposed legislation was not reported out by the
full Judiciary Committee, however.
3 The Copyright Royalty Board (CRB) is the
latest in a series of administrative bodies Congress
has created to adjust the rates and terms for the
statutory licenses. The first, the Copyright Royalty
Tribunal (CRT), was created in 1976. See Public
Law 94553, sec. 801, 90 Stat. 2541, 259496
(1976). In 1993, Congress replaced the CRT with a
system of ad-hoc copyright arbitration royalty
panels (CARPs). See Copyright Royalty Tribunal
Reform Act of 1993, Public Law 103198, sec. 2,
107 Stat. 2304, 23042308. Congress replaced the
CARP system with the CRB in 2004. See Copyright
Royalty and Distribution Reform Act of 2004, Public
Law 108419, 118 Stat. 2341.
4 See 17 U.S.C. 801(b)(1).
E:\FR\FM\17MRN1.SGM
17MRN1
television, film, and videos; advertising

and other types of commercial uses; and
derivative uses such as samplingare
licensed directly from the copyright
owner according to negotiated rates and
terms.
Musical WorksPublic Performance.
The method for licensing public
performances of musical works differs
significantly from the statutory
mechanical license provided under
Section 115. Licensing fees for such
performances are generally collected on
behalf of music publishers, songwriters,
and composers by the three major PROs:
the American Society of Composers,
Authors and Publishers (ASCAP),
Broadcast Music, Inc. (BMI), and
SESAC. Songwriters and composers, as
well as their publishers, commonly
affiliate with one of the three for
purposes of receiving public
performance income. Rather than songby-song licenses, the PROs typically
offer blanket licenses for the full
range of music in their repertories.
These licenses are available for a wide
variety of uses, including terrestrial,
satellite, and internet radio, on-demand
music streaming services, Web site and
television uses, and performance of
music in bars, restaurants, and other
commercial establishments. The PROs
monitor the use of musical works by
these various entities and apportion and
distribute collected royalties to their
publisher, songwriter, and composer
members.
Unlike the mechanical right, the
public performance of musical works is
not subject to compulsory licensing
under the Copyright Act. Since 1941,
however, ASCAP and BMIs licensing
practices have been subject to antitrust
consent decrees overseen by the
Department of Justice.5 These consent
decrees were designed to protect
licensees from price discrimination or
other anti-competitive behavior by the
two PROs. Under the decrees, ASCAP
and BMI administer the public
performance right for their members
musical works on a non-exclusive basis.
They are required to provide a license
to any person who seeks to perform
copyrighted musical works publicly,
and must offer the same terms to
similarly situated licensees. In addition,
ASCAPs consent decree expressly bars
5 See generally United States v. Broadcast Music,
Inc., 275 F.3d 168, 17172 (2d Cir. 2001)
(describing the history). SESAC, a smaller
performing rights organization created in 1930 to
serve European publishers, is not subject to a
similar consent decree, although it has been
involved recently in private antitrust litigation. See
Meredith Corp. v. SESAC LLC, No. 09cv9177,
2014 WL 812795 (S.D.N.Y. Mar. 3, 2014).
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18:45 Mar 14, 2014
Jkt 232001
it from offering mechanical licenses.6

Since 1950, prospective licensees that
are unable to agree to a royalty rate with
ASCAP or BMI have been able to seek
a determination of a reasonable license
fee in the federal district court for the
Southern District of New York.7
The two PRO consent decrees were
last amended well before the
proliferation of digital music: The BMI
decree in 1994,8 and the ASCAP decree
in 2001.9 The consent decrees have been
the subject of much litigation over the
years, including, most recently, suits
over whether music publishers can
withdraw digital licensing rights from
the PROs and negotiate public
performance licenses directly with
digital music services.10
Sound RecordingsReproduction
and Distribution. Congress extended
federal copyright protection to sound
recordings in 1972. That law, however,
did not provide retroactive protection
for sound recordings fixed prior to
February 15, 1972, and such works
therefore have no federal copyright
status.11 They are, however, subject to
the protection of applicable state laws
until 2067. See 17 U.S.C. 301(c).12
6 United States v. ASCAP, No. 41cv1395, 2001
2 Trade Cas. (CCH) 73,474, 2001 WL 1589999, *3
(S.D.N.Y. June 11, 2001). Although BMI has taken
the position that a strict reading of its consent
decree does not bar it from offering mechanical
licenses, it generally has not done so. See Broadcast
Music, Inc., Comments on Department of Commerce
Green Paper 45 (Nov. 13, 2013), available at http://
www.ntia.doc.gov/files/ntia/bmi_comments.pdf.
7 Significantly, musical work owners are
precluded from offering evidence concerning the
licensing fees paid for digital performances of
sound recordings as a point of comparison in the
district court ratesetting proceedings. Section 114 of
the Copyright Act provides that license fees payable
for the public performance of sound recordings may
not be taken into account in any administrative,
judicial, or other governmental proceeding to set or
adjust the rates payable to musical work copyright
owners. 17 U.S.C. 114(i).
8 United States v. Broadcast Music, Inc., No. 64
cv3787, 1966 Trade Cas. (CCH) 71,941 (S.D.N.Y.
1966), as amended, 1996 Trade Cases (CCH)
71,378, 1994 WL 901652 (S.D.N.Y. Nov. 18, 1994).
9 United States v. ASCAP, No. 41cv1395, 2001
2 Trade Cas. (CCH) 73,474, 2001 WL 1589999
(S.D.N.Y. June 11, 2001).
10 See In re Pandora Media, Inc., Nos. 12cv
8035, 41cv1395, 2013 WL 5211927 (S.D.N.Y.
Sept. 17, 2013); Broadcast Music, Inc. v. Pandora
Media, Inc., Nos. 13cv4037, 64cv3787, 2013
WL 6697788 (S.D.N.Y. Dec. 19, 2013).
11 In 2009, Congress asked the Copyright Office to
study the desirability and means of extending
federal copyright protection to pre-February 15,
1972 sound recordings. Public Law 1118, 123 Stat.
524 (2010) (explanatory statement). In 2011, the
Office completed that study, issuing a report
recommending that federal copyright protection be
so extended. United States Copyright Office,
Federal Copyright Protection for Pre-1972 Sound
Recordings (2011), available at http://
www.copyright.gov/docs/sound/pre-72-report.pdf.
12 Thus, a person wishing to digitally perform a
pre-1972 sound recording cannot rely on the
Section 112 and 114 statutory licenses and must
PO 00000
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14741
The owner of a copyright in a sound

recording fixed on or after February 15,
1972, like the owner of a musical work
copyright, enjoys the exclusive right to
reproduce and distribute phonorecords
embodying the sound recording,
including by means of digital
transmission, and to authorize others to
do the same. 17 U.S.C. 106(1), (3),
301(c). Except in the limited
circumstances where statutory licensing
applies, as described below, licenses to
reproduce and distribute sound
recordingssuch as those necessary to
make and distribute CDs, transmit
DPDs, and operate online music
services, as well as to use sound
recordings in a television shows, films,
video games, etc.are negotiated
directly between the licensee and sound
recording owner (typically a record
label). Thus, while in the case of
musical works, the royalty rates and
terms applicable to the making and
distribution of CDs, DPDs, and the
operation of interactive music services
are subject to government oversight,
with respect to sound recordings,
licensing for those same uses takes place
without government supervision.
Sound RecordingsPublic
Performance. Unlike musical works, a
sound recording owners public
performance right does not extend to all
manner of public performances.
Traditionally, the public performance of
sound recordings was not subject to
protection at all under the Copyright
Act. In 1995, however, Congress enacted
the DPRSRA, which provided for a
limited right when sound recordings are
publicly performed by means of a
digital audio transmission. Public Law
10439, 109 Stat. 336; 17 U.S.C. 106(6),
114(a). This right extends, for example,
to satellite radio and internet-based
music services.13 Significantly,
however, the public performance of
sound recordings by broadcast radio
stations remains exempt under the Act.
17 U.S.C. 114(d)(1).14
instead obtain a license directly from the owner of
the sound recording copyright. See Determination
of Rates and Terms for Preexisting Subscription
Services and Satellite Digital Audio Radio Services,
78 FR 23054, 23073 (Apr. 17, 2013) (determination
of the CRB finding that [t]he performance right
granted by the copyright laws for sound recordings
applies only to those recordings created on or after
February 15, 1972 and adopting provisions
allowing exclusion of performances of pre-1972
sound recordings from certain statutory royalties).
13 In 1998, as part of the DMCA, Congress
amended Sections 112 and 114 of the Copyright Act
to clarify that the digital sound recording
performance right applies to services like
webcasting. See Public Law 105304, secs. 402,
405, 112 Stat. 2860, 2888, 2890.
14 The Copyright Office has long supported the
extension of the public performance right in sound
E:\FR\FM\17MRN1.SGM
Continued
17MRN1
14742
For certain uses, including those by

satellite and internet radio, the digital
public performance right for sound
recordings is subject to statutory
licensing in accordance with Sections
112 and 114 of the Act. Section 112
provides for a license to reproduce the
phonorecords (sometimes referred to as
ephemeral recordings) necessary to
facilitate a services transmissions to
subscribers, while Section 114 licenses
the public performances of sound
recordings resulting from those
transmissions. This statutory licensing
framework applies only to
noninteractive (i.e., radio-style) services
as defined under Section 114;
interactive (or on-demand services) are
not covered. See 17 U.S.C. 112(e); 17
U.S.C. 114(d)(2), (f). For interactive
services, sound recording owners
negotiate licenses directly with users.
The rates and terms applicable to the
public performance of sound recordings
under the Section 112 and 114 licenses
are established by the CRB. See 17
U.S.C. 801 et seq. The royalties due
under these licenses are paid to an
entity designated by the CRBcurrently
SoundExchange, Inc.which collects,
processes, and distributes payments on
behalf of rights holders.15
Notably, under Section 114, the rate
standard applicable to those satellite
radio and music subscription services
that existed as of July 31, 1998 (i.e.,
preexisting services 16) differs from
recordings to broadcast radio. See Internet
Streaming of Radio Broadcasts: Balancing the
Interests of Sound Recording Copyright Owners
With Those of Broadcasters: Hearing Before the
Subcomm. on Courts, the Internet, and Intellectual
Property of the H. Comm. on the Judiciary, 108th
Cong. 67 (2004) (statement of David Carson,
General Counsel, U.S. Copyright Office), available
at http://www.copyright.gov/docs/
carson071504.pdf. Only a handful of countries lack
such a right; in addition to the United States, the
list includes China, North Korea, and Iran. This gap
in copyright protection has the effect of depriving
American performers and labels of foreign royalties
to which they would otherwise be entitled, because
even countries that recognize a public performance
right in sound recordings impose a reciprocity
requirement. According to one estimate, U.S. rights
holders lose approximately $70 million each year
in royalties for performances in foreign broadcasts.
See generally Mary LaFrance, From Whether to
How: The Challenge of Implementing a Full Public
Performance Right in Sound Recordings, 2 Harv. J.
of Sports & Ent. L 221, 226 (2011).
15 The Act requires that receipts under the
Section 114 statutory license be divided in the
following manner: 50 percent to the owner of the
digital public performance right in the sound
recording, 212 percent to nonfeatured musicians,
212 percent to nonfeatured vocalists, and 45 percent
to the featured recording artists. 17 U.S.C. 114(g)(2).
16 17 U.S.C. 114(j)(10), (11). Today, Sirius/XM is
the only preexisting satellite service that seeks
statutory licenses under Section 114. See
Determination of Rates and Terms for Preexisting
Subscription Services and Satellite Digital Audio
Radio Services, 78 FR 23054, 23055 (Apr. 17, 2013).
There are two preexisting subscription services,
Music Choice and Muzak. Id.
VerDate Mar<15>2010
18:45 Mar 14, 2014
Jkt 232001
that for other services such as internet

radio.17 Royalty rates for pre-existing
satellite radio and subscription services
are governed by the four-factor standard
in Section 801(b) of the Actthat is, the
standard that applies to the Section 115
license for musical works.18 By contrast,
under the terms of Section 114, rates
and terms for noninteractive public
performances via internet radio and
other newer digital music services are to
be determined by the CRB based on
what a willing buyer and willing
seller would have agreed to in the
marketplace.19
Subjects of Inquiry
The Copyright Office seeks public
input on the effectiveness of the current
methods for licensing musical works
and sound recordings. Accordingly, the
Office invites written comments on the
specific subjects above. A party
choosing to respond to this Notice of
Inquiry need not address every subject,
but the Office requests that responding
parties clearly identify and separately
address each subject for which a
response is submitted.
Musical Works
1. Please assess the current need for
and effectiveness of the Section 115
statutory license for the reproduction
and distribution of musical works.
2. Please assess the effectiveness of
the royalty ratesetting process and
standards under Section 115.
3. Would the music marketplace
benefit if the Section 115 license were
updated to permit licensing of musical
works on a blanket basis by one or more
collective licensing entities, rather than
17
18 See
17 U.S.C. 114(f)(1), 801(b)(1).

U.S.C. 114(f)(2)(B) instructs the CRB to
establish rates and terms that most clearly
represent the rates and terms that would have been
negotiated in the marketplace between a willing
buyer and willing seller. The provision further
requires the CRB to consider whether use of the
service may substitute for or may promote the sales
of phonorecords or otherwise may interfere with or
may enhance the sound recording copyright
owners other streams of revenue from its sound
recordings, and the relative roles of the copyright
owner and the transmitting entity in the
copyrighted work and the service made available to
the public with respect to relative creative
contribution, technological contribution, capital
investment, cost, and risk. Id.
For all types of services eligible for a Section 114
statutory license, the rates for the phonorecords
(ephemeral recordings) used to operate the service
are to be established by the CRB under Section 112
according to a willing buyer/willing seller
standard. 17 U.S.C. 112(e). In general, the Section
112 rates have been a relatively insignificant part
of the CRBs ratesetting proceedings, and have been
established as a subset of the 114 rate. See, e.g.,
Determination of Rates and Terms for Preexisting
Subscription Services and Satellite Digital Audio
Radio Services, 78 FR 23054, 2305556 (Apr. 17,
2013).
19 17
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Sfmt 4703
on a song-by-song basis? If so, what

would be the key elements of any such
system?
4. For uses under the Section 115
statutory license that also require a
public performance license, could the
licensing process be facilitated by
enabling the licensing of performance
rights along with reproduction and
distribution rights in a unified manner?
How might such a unified process be
effectuated?
the current process for licensing the
public performances of musical works.
standards applicable under the consent
decrees governing ASCAP and BMI, as
well as the impact, if any, of 17 U.S.C.
114(i), which provides that [l]icense
fees payable for the public performance
of sound recordings under Section
106(6) shall not be taken into account in
any administrative, judicial, or other
governmental proceeding to set or adjust
the royalties payable to copyright
owners of musical works for the public
performance of their works.
7. Are the consent decrees serving
their intended purpose? Are the
concerns that motivated the entry of
these decrees still present given modern
market conditions and legal
developments? Are there alternatives
that might be adopted?
Sound Recordings
8. Please assess the current need for
and effectiveness of the Section 112 and
Section 114 statutory licensing process.
standards applicable to the various
types of services subject to statutory
licensing under Section 114.
10. Do any recent developments
suggest that the music marketplace
might benefit by extending federal
copyright protection to pre-1972 sound
recordings? Are there reasons to
continue to withhold such protection?
Should pre-1972 sound recordings be
included within the Section 112 and
114 statutory licenses?
11. Is the distinction between
interactive and noninteractive services
adequately defined for purposes of
eligibility for the Section 114 license?
Platform Parity
12. What is the impact of the varying
ratesetting standards applicable to the
Section 112, 114, and 115 statutory
licenses, including across different
music delivery platforms. Do these
differences make sense?
13. How do differences in the
applicability of the sound recording
E:\FR\FM\17MRN1.SGM
17MRN1
public performance right impact music
licensing?
Changes in Music Licensing Practices
14. How prevalent is direct licensing
by musical work owners in lieu of
licensing through a common agent or
PRO? How does direct licensing impact
the music marketplace, including the
major record labels and music
publishers, smaller entities, individual
creators, and licensees?
15. Could the government play a role
in encouraging the development of
alternative licensing models, such as
micro-licensing platforms? If so, how
and for what types of uses?
16. In general, what innovations have
been or are being developed by
copyright owners and users to make the
process of music licensing more
effective?
17. Would the music marketplace
benefit from modifying the scope of the
existing statutory licenses?
Revenues and Investment
18. How have developments in the
music marketplace affected the income
of songwriters, composers, and
recording artists?
19. Are revenues attributable to the
performance and sale of music fairly
divided between creators and
distributors of musical works and sound
recordings?
20. In what ways are investment
decisions by creators, music publishers,
and record labels, including the
investment in the development of new
projects and talent, impacted by music
licensing issues?
21. How do licensing concerns impact
the ability to invest in new distribution
models?
Data Standards
22. Are there ways the federal
government could encourage the
adoption of universal standards for the
identification of musical works and
sound recordings to facilitate the music
licensing process?
Other Issues
23. Please supply or identify data or
economic studies that measure or
quantify the effect of technological or
other developments on the music
licensing marketplace, including the
revenues attributable to the
consumption of music in different
formats and through different
distribution channels, and the income
earned by copyright owners.
24. Please identify any pertinent
issues not referenced above that the
Copyright Office should consider in
conducting its study.
VerDate Mar<15>2010
18:45 Mar 14, 2014
Jkt 232001
Dated: March 11, 2014.

Jacqueline C. Charlesworth,
General Counsel and Associate, Register of
Copyrights.
14743
Requesters must cite the control

number, which appears in parentheses
after the name of the agency which
submitted the schedule, and must
provide a mailing address. Those who
[FR Doc. 201405711 Filed 31414; 8:45 am]
desire appraisal reports should so
BILLING CODE 141030P
indicate in their request.
NATIONAL ARCHIVES AND RECORDS Margaret Hawkins, Director, Records
Management Services (ACNR), National
ADMINISTRATION
Archives and Records Administration,
8601 Adelphi Road, College Park, MD
[NARA2014020]
207406001. Telephone: 3018371799.
Records Schedules; Availability and
Email: request.schedule@nara.gov.
Request for Comments
SUPPLEMENTARY INFORMATION: Each year
Federal agencies create billions of
AGENCY: National Archives and Records
records on paper, film, magnetic tape,
Administration (NARA).
and other media. To control this

ACTION: Notice of availability of
accumulation, agency records managers

proposed records schedules; request for
prepare schedules proposing retention
comments.
periods for records and submit these

schedules for NARAs approval. These
SUMMARY: The National Archives and
schedules provide for the timely transfer
Records Administration (NARA)
into the National Archives of
publishes notice at least once monthly
historically valuable records and
of certain Federal agency requests for
authorize the disposal of all other
records disposition authority (records
records after the agency no longer needs
schedules). Once approved by NARA,
them to conduct its business. Some
records schedules provide mandatory
instructions on what happens to records schedules are comprehensive and cover
all the records of an agency or one of its
when no longer needed for current
major subdivisions. Most schedules,
Government business. They authorize
however, cover records of only one
the preservation of records of
office or program or a few series of
continuing value in the National
records. Many of these update
Archives of the United States and the
previously approved schedules, and
destruction, after a specified period, of
some include records proposed as
records lacking administrative, legal,
permanent.
research, or other value. Notice is
The schedules listed in this notice are
published for records schedules in
media-neutral
unless specified
which agencies propose to destroy
otherwise. An item in a schedule is
records not previously authorized for
media-neutral when the disposition
disposal or reduce the retention period
instructions may be applied to records
of records already authorized for
regardless of the medium in which the
disposal. NARA invites public
comments on such records schedules, as records are created and maintained.
Items included in schedules submitted
required by 44 U.S.C. 3303a(a).
to NARA on or after December 17, 2007,
DATES: Requests for copies must be
are media-neutral unless the item is
received in writing on or before April
specifically limited to a specific
16, 2014. Once the appraisal of the
medium. (See 36 CFR 1225.12(e).)
records is completed, NARA will send
No Federal records are authorized for
a copy of the schedule. NARA staff
destruction without the approval of the
usually prepares appraisal memoranda
Archivist of the United States. This
that contain additional information
approval is granted only after a
concerning the records covered by a
thorough consideration of their
proposed schedule. These, too, may be
administrative use by the agency of
requested and will be provided once the origin, the rights of the Government and
appraisal is completed. Requesters will
of private persons directly affected by
be given 30 days to submit comments on the Governments activities, and
the schedule.
whether or not they have historical or
ADDRESSES: You may request a copy of
other value.
any records schedule identified in this
Besides identifying the Federal
notice by contacting Records
agencies and any subdivisions
Management Services (ACNR) using one requesting disposition authority, this
of the following means:
public notice lists the organizational
unit(s) accumulating the records or
Mail: NARA (ACNR), 8601 Adelphi
indicates agency-wide applicability in
Road, College Park, MD 207406001
the case of schedules that cover records
Email: request.schedule@nara.gov
that may be accumulated throughout an
FAX: 3018373698
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E:\FR\FM\17MRN1.SGM
17MRN1
25626
Federal Register / Vol. 79, No. 86 / Monday, May 5, 2014 / Notices
imports) and (a)(2)(B)(II.B.) (shift in

production to a foreign country) have
not been met.
85,099, Harrington Tool Company,
Ludington, Michigan.
The workers firm does not produce
an article as required for certification
under Section 222 of the Trade Act of
1974.
85,046, AIG Claims, Houston, Texas.
85,097, SuperMedia Services, LLC.,
Middleton, Massachusetts.
85,122, Bimbo Bakaries USA, Inc.,
Wichita, Kansas.
85,144, IP & Science (Patent Payments),
Bingham Farms, Michigan.
85,145, AXA Equitable Life Insurance
Company, Charlotte, North Carolina.
Determinations Terminating
Investigations of Petitions for Worker
Adjustment Assistance
After notice of the petitions was
published in the Federal Register and
on the Departments Web site, as
required by Section 221 of the Act (19
USC 2271), the Department initiated
investigations of these petitions.
None.
I hereby certify that the
aforementioned determinations were
issued during the period of March 31,
2014 through April 4, 2014. These
determinations are available on the
Departments Web site tradeact/taa/taa_
search_form.cfm under the searchable
listing of determinations or by calling
the Office of Trade Adjustment
Assistance toll free at 8883656822.
Signed at Washington, DC this 10th day of
April 2014.
Del Min Amy Chen,
Assistance.
[FR Doc. 201410166 Filed 5214; 8:45 am]
LIBRARY OF CONGRESS
U.S. Copyright Office
[Docket No. 201403]
Music Licensing Study

U.S. Copyright Office, Library
of Congress.
ACTION: Notice of public roundtables.
emcdonald on DSK67QTVN1PROD with NOTICES
AGENCY:
The U.S. Copyright Office is

undertaking a study to evaluate the
effectiveness of current methods for
licensing musical works and sound
recordings. The study will assess
whether and how existing methods
serve the music marketplace, including
new and emerging digital distribution
platforms. In addition to soliciting
SUMMARY:
VerDate Mar<15>2010
17:56 May 02, 2014
Jkt 232001
written comments, the Office is

conducting three two-day public
roundtables on music licensing issues.
A Notice of Inquiry soliciting written
comments in response to a number of
subjects was issued on March 17, 2014,
and written comments are due on or
before May 16, 2014. See 78 FR 14739
(Mar. 17, 2014). At this time, the
Copyright Office announces three public
roundtables to be held in June 2014 in
Nashville, Los Angeles, and New York.
DATES: The two-day public roundtable
in Nashville will be held on June 4 and
5, 2014, on both days from 9:00 a.m. to
5:00 p.m. The two-day public
roundtable in Los Angeles will be held
on June 16 and 17, 2014, on both days
from 9:00 a.m. to 5:00 p.m. The two-day
public roundtable in New York will be
held on June 23 and 24, 2014, from 9:00
a.m. to 5:00 p.m. on June 23, and from
8:30 a.m. to 4:00 p.m. on June 24.
Requests to participate in the
roundtables must be received by the
Copyright Office by May 20, 2014.
ADDRESSES: The Nashville roundtable
will take place at Belmont Universitys
Mike Curb College of Entertainment and
Music Business, 34 Music Square East,
Nashville, Tennessee 37203. The Los
Angeles roundtable will take place at
the UCLA School of Law, 385 Charles E.
Young Drive East, Los Angeles,
California 90095. The New York
roundtable will take place at the New
York University School of Law, 40
Washington Square South, New York,
New York 10012. Requests to participate
in the roundtables should be submitted
using the form available on the Offices
Web site at http://www.copyright.gov/
docs/musiclicensingstudy. If electronic
submission is not feasible, please
contact the Office at 2027078350 for
special instructions.
at 2027078350.
SUPPLEMENTARY INFORMATION: Congress
is currently engaged in a comprehensive
review of the U.S. Copyright Act, 17
U.S.C. 101 et seq., to evaluate potential
revisions to the law in light of
technological and other developments
that impact the creation, dissemination,
and use of copyrighted works. In light
of Congresss review and significant
changes to the music industry in recent
years, the U.S. Copyright Office is
conducting a study to assess the
PO 00000
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Fmt 4703
Sfmt 4703
licensing sound recordings and musical

works. The Office published a Notice of
Inquiry on March 17, 2014, seeking
written comments on twenty-four
subjects concerning the current
environment in which music is
licensed. See 78 FR 14739 (Mar. 17,
2014).
At this time, the Copyright Office is
providing notice of its intention to seek
further input for its study through three
two-day public roundtables to be held
in Nashville, Los Angeles, and New
York. The public roundtables will offer
an opportunity for interested parties to
comment on pertinent music licensing
issues. The roundtables will address
topics set forth in the Notice of Inquiry,
including: The current music licensing
landscape; licensing of sound
recordings, including under the Section
112 and 114 statutory licenses and the
treatment of pre-1972 recordings;
licensing of musical works, including
under the Section 115 statutory license
and through the performing rights
organizations (PROs); fair royalty
rates and platform parity; industry data
standards; industry incentives and
investment; and potential future
developments in music licensing.
Following discussion of the various
agenda topics by roundtable
participants, observers at the
roundtables will be provided a limited
opportunity to offer additional
comments.
The roundtable hearing rooms will
have a limited number of seats for
participants and observers. Those who
seek to participate should complete and
submit the form available on the Offices
Web site at http://www.copyright.gov/
docs/musiclicensingstudy so it is
received by the Office no later than May
20, 2014. For individuals who wish to
observe a roundtable, the Office will
provide public seating on a first-come,
first-serve basis on the days of the
roundtable.
Dated: April 30, 2014.
General Counsel and Associate Register of
Copyrights.
[FR Doc. 201410242 Filed 5214; 8:45 am]
NATIONAL ARCHIVES AND RECORDS

ADMINISTRATION
[NARA 2014026]
Creation of Freedom of Information Act

Advisory Committee
National Archives and Records
Administration.
AGENCY:
E:\FR\FM\05MYN1.SGM
05MYN1
Federal Register / Vol. 79, No. 141 / Wednesday, July 23, 2014 / Notices
U.S.C. 300j9(i), 33 U.S.C. 1367, 15
U.S.C. 2622, 42 U.S.C. 6971, 42
U.S.C. 7622, 42 U.S.C. 9610, 42
U.S.C. 5851, 49 U.S.C. 42121, 18
U.S.C. 1514A, 49 U.S.C. 60129, 49
U.S.C. 20109, 6 U.S.C. 1142, 15
U.S.C. 2087, 29 U.S.C. 218c, 12
U.S.C. 5567, 46 U.S.C. 2114, 21
U.S.C. 399d, and 49 U.S.C. 30171.
Signed at Washington, DC on July 18, 2014.
David Michaels,
Assistant Secretary of Labor for Occupational
Safety and Health.
[FR Doc. 201417342 Filed 72214; 8:45 am]
LIBRARY OF CONGRESS
Copyright Office
[Docket No. 201403]
Music Licensing Study: Second

U.S. Copyright Office, Library
of Congress.
ACTION: Notice of inquiry.
AGENCY:
The U.S. Copyright Office has

undertaken a study to evaluate the
recordings. At this time, the Office seeks
additional comments on whether and
how existing music licensing methods
serve the music marketplace, including
new and emerging digital distribution
platforms.
DATES: Written comments are due on or
before August 22, 2014.
ADDRESSES: All comments shall be
http://www.copyright.gov/200B;docs/
200B;musiclicensingstudy. The Web site
exceed six megabytes (MB) in one of the
contains searchable, accessible text (not
WordPerfect; Rich Text Format (RTF); or
on its Web site in the form that they are
received, along with associated names
and organizations. If electronic
mstockstill on DSK4VPTVN1PROD with NOTICES
SUMMARY:
VerDate Mar<15>2010
17:33 Jul 22, 2014
Jkt 232001
submission of comments is not feasible,

at 2027078350.
I. Background
conducting a study to assess the
effectiveness of the current methods for
recordings. To aid with this study, the
Office published an initial Notice of
Inquiry on March 17, 2014 (First
Notice) seeking written comments on
twenty-four subjects concerning the
current environment in which music is
licensed. 78 FR 14739 (Mar. 17, 2014).
The eighty-five written submissions
received in response to this initial
notice can be found on the Copyright
Office Web site at http://
www.copyright.gov/docs/musiclicensing
study/200B;comments/Docket2014_3/.
In June 2014, the Office conducted three
two-day public roundtables in
Nashville, Los Angeles, and New York
City. The three roundtables provided
participants with the opportunity to
share their views on the topics
identified in the First Notice and other
issues relating to music licensing. See
79 FR 25626 (May 5, 2014). Transcripts
of the proceedings at each of the three
roundtables will be made available on
the Copyright Office Web site at
200B;musiclicensingstudy/.
In the initial round of written
comments and during the roundtable
sessions, a number of significant issues
were discussed that the Office believes
merit additional consideration.
First, as explained in the First Notice,
in 2013, the two federal district courts
overseeing the antitrust consent decrees
governing the largest performance rights
organizations (PROs), American
Society of Composers, Authors and
Publishers (ASCAP) and Broadcast
Music, Inc. (BMI), held in separate
opinions that under those decrees,
music publishers could not withdraw
selected rightssuch as new media
rightsto be directly licensed outside of
the PROs; rather, a particular
publishers song catalog must either be
all in or all out. 1 Following these
1 In re Pandora Media, Inc., Nos. 12cv8035, 41
cv1395, 2013 WL 5211927 (S.D.N.Y. Sept. 17,
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42833
rulings, both in public statements and at

the recent roundtables, certain major
music publishers have indicated that, if
the consent decrees remain in place
without modification, they intend to
withdraw their entire catalogs from the
two PROs and directly license public
performances.2 Such a move would
affect not only online services, but more
traditional areas of public performance
such as radio, television, restaurants,
and bars.
Stakeholders at the roundtables
expressed significant concerns regarding
the impact of major publishers
complete withdrawal from the PROs.
Notably, traditional songwriter contracts
typically include provisions that assume
that a songwriters performance
royalties will be collected by and paid
directly to the songwriter through a
PRO, without contemplating alternative
arrangements. Songwriters and
composers raised questions as to how
withdrawing publishers would fulfill
this responsibility in the future,
including whether they would be in a
position to track and provide adequate
usage and payment data under a direct
licensing system. Another concern is
how such withdrawals would affect the
PROs cost structures and the
commission rates for smaller entities
and individual creators who continued
to rely upon these organizations to
license and administer their public
performance rights. At the same time,
some stakeholders questioned the
existing distribution methodologies of
the PROs, suggesting that the PROs
should rely more on census-based
reporting (as is typically supplied by
digital services) and less on sampling or
non-census-based approaches to allocate
royalty fees among members.
Next, many stakeholders appear to be
of the view that the Section 115
statutory license for the reproduction
and distribution of musical works
should either be eliminated or
significantly modified to reflect the
realities of the digital marketplace.
While music owners and music users
have expressed a range of views as to
the particulars of how this might be
accomplished, much of the commentary
and discussion has centered on two
2013); Broadcast Music, Inc., v. Pandora Media,
Inc., Nos. 12cv4037, 64cv3787, 2013 WL
6697788 (S.D.N.Y. Dec. 19, 2013).
2 See Ed Christman, Universal Music Publishing
Plots Exit From ASCAP, BMI, Billboard (Feb. 1,
2013), http://www.billboard.com/biz/articles/news/
publishing/1537554/universal-music-publishingplots-exit-from-ascap-bmi; see also Ed Christman,
Sony/ATVs Martin Bandier Repeats Warning to
ASCAP, BMI, Billboard (July 11, 2014), http://
www.billboard.com/biz/articles/news/publishing/
6157469/sonyatvs-martin-bandier-repeats-warningto-ascap-bmi.
E:\FR\FM\23JYN1.SGM
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42834
possible approaches. The first would be

to sunset the Section 115 license with
the goal of enabling musical work
owners to negotiate licenses directly
with music users at unregulated,
marketplace rates (as the
synchronization market for musical
works currently operates). Some
stakeholders have acknowledged,
however, that such a market-based
system might still have to allow for the
possibility of collective licensing to
accommodate individuals and smaller
copyright owners who might lack the
capacity or leverage to negotiate directly
with online service providers and
others.
A second model, advocated by the
record labels, would be to eliminate
Section 115 and instead allow music
publishers and sound recording owners
collectively to negotiate an
industrywide revenue-sharing
arrangement as between them. For the
uses falling under this approach, a fixed
percentage of licensing fees for use of a
recorded song would be allocated to the
musical work and the remainder would
go to the sound recording owner. Record
labels would be permitted to bundle
musical work licenses with their sound
recording licenses, with third-party
licensees to pay the overall license fees
to publishers and labels according to the
agreed industry percentages. While
musical work owners would retain
control over the first recordings of their
works, such an arrangement would
cover not only audio-only uses but
would extend to certain audiovisual
uses not currently covered by the
Section 115 license, such as music
videos and lyric display.
Another theme that emerged from the
first round of written comments and the
public roundtables relates to the Section
112 and 114 statutory licenses for the
digital performance of sound
recordings.3 Although there appeared to
3 Based upon written comments and discussion at
the roundtables, it appears that certain language in
the First Notice concerning the lack of availability
of licenses for pre-1972 recordings under Sections
112 and 114 may have been misinterpreted by
some. In a footnote, the First Notice observed that
a person wishing to digitally perform a pre-1972
sound recording cannot rely on the Section 112 and
114 statutory licenses and must instead obtain a
license directly from the owner of the sound
recording copyright. 78 FR 14739, 14741 n.12. In
making this statement, the Office was not opining
on the necessity of obtaining such a license under
state law, but merely observing that licenses for the
digital performance of pre-1972 sound recordings,
and for the reproductions to enable such
performances, are not available under Section 112
or 114. A licensee seeking such a license would
thus need to obtain it directly from the sound
recording owner (as the Office understands to be
the current practice of some licensees with respect
to performances of pre-1972 recordings).
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be substantial agreement that these

licenses are largely effective, there was
also a general consensus that
improvements could be made to the
Copyright Royalty Judges (CRJs)
statutorily mandated ratesetting
procedures. For instance, under 17
U.S.C. 803(b)(6), parties in proceedings
before the CRJs must submit written
direct statements before any discovery is
conducted. A number of commenters
believed that the ratesetting process
could be significantly streamlined by
allowing for discovery before
presentation of the parties direct cases,
as in ordinary civil litigation.
Stakeholders were also of the view that
it would be more efficient to combine
what are now two separate direct and
rebuttal phases of ratesetting hearings,
as contemplated by 17 U.S.C.
803(b)(6)(C), into a single integrated
trialagain as is more typical of civil
litigation. There was also general
agreement that more could be done to
encourage settlement of rate disputes,
such as adoption of settlements earlier
in the process and allowing such
settlements to be treated as nonprecedential with respect to non-settling
participants.
Finally, many commenting parties
pointed to the lack of standardized and
reliable data related to the identity and
ownership of musical works and sound
recordings as a significant obstacle to
more efficient music licensing
mechanisms. Stakeholders observed that
digital music files are often distributed
to online providers without identifiers
such as the International Standard
Recording Code (ISRC) and/or
International Standard Musical Work
Code (ISWC), and that the lack of
these identifiers (or other unique or
universal identifiers) makes it difficult
for licensees or others to link particular
music files with the copyrighted works
they embody. In addition to problems
identifying the musical works and
sound recordings themselves,
commenters noted the difficulties of
ascertaining ownership information,
On the other side of the coin, it appears that
others have misread the Offices observation in its
report on pre-1972 sound recordings that [i]n
general, state law does not appear to recognize a
performance right in sound recordings as an
official statement that no such protection is (or
should be) available under state law. See U.S.
Copyright Office, Federal Copyright Protection for
Pre-1972 Sound Recordings 44 (2011). This, too, is
a misinterpretation. While, as a factual matter, a
state may not have affirmatively acknowledged a
public performance right in pre-1972 recordings as
of the Offices 2011 report, the language in the
report should not be read to suggest that a state
could not properly interpret its law to recognize
such a right. As the Office explained, common law
protection is amorphous, and courts often perceive
themselves to have broad discretion. Id. at 48.
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Frm 00080
Fmt 4703
Sfmt 4703
especially in the case of musical works,

which frequently have multiple owners
representing varying percentages of
particular songs. These issues, in turn,
relate to a more general transparency
concern of music creators that usage and
payment informationincluding
information about advances and equity
provided by licensees to publishers and
labelsmay not be fully and readily
accessible to songwriters, composers
and artists.
At this time, the Office is soliciting
additional comments on these subjects,
as set forth in the specific questions
below. Parties may also take this
opportunity to respond to the positions
taken by others in the first round of
comments and/or at the roundtables.
Those who plan to submit additional
comments should be aware that the
Office has studied and will take into
consideration the comments already
received, so there is no need to restate
previously submitted material. While a
party choosing to respond to this Notice
of Inquiry need not address every
subject below, the Office requests that
responding parties clearly identify and
separately address each subject for
which a response is submitted.
Subjects of Inquiry
Data and Transparency
1. Please address possible methods for
ensuring the development and
dissemination of comprehensive and
authoritative public data related to the
identity and ownership of musical
works and sound recordings, including
how best to incentivize private actors to
gather, assimilate and share reliable
data.
2. What are the most widely embraced
identifiers used in connection with
musical works, sound recordings,
songwriters, composers, and artists?
How and by whom are they issued and
managed? How might the government
incentivize more universal availability
and adoption?
3. Please address possible methods for
enhancing transparency in the reporting
of usage, payment, and distribution data
by licensees, record labels, music
publishers, and collective licensing
entities, including disclosure of nonusage-based forms of compensation
(e.g., advances against future royalty
payments and equity shares).
Musical Works
4. Please provide your views on the
logistics and consequences of potential
publisher withdrawals from ASCAP
and/or BMI, including how such
withdrawals would be governed by the
PROs; whether such withdrawals are
E:\FR\FM\23JYN1.SGM
23JYN1
compatible with existing publisher
agreements with songwriters and
composers; whether the PROs might
still play a role in administering
licenses issued directly by the
publishers, and if so, how; the effect of
any such withdrawals on PRO cost
structures and commissions; licensees
access to definitive data concerning
individual works subject to withdrawal;
and related issues.
5. Are there ways in which the
current PRO distribution methodologies
could or should be improved?
6. In recent years, PROs have
announced record-high revenues and
distributions. At the same time, many
songwriters report significant declines
in income. What marketplace
developments have led to this result,
and what implications does it have for
the music licensing system?
7. If the Section 115 license were to
be eliminated, how would the transition
work? In the absence of a statutory
regime, how would digital service
providers obtain licenses for the
millions of songs they seem to believe
are required to meet consumer
expectations? What percentage of these
works could be directly licensed
without undue transaction costs and
would some type of collective licensing
remain necessary to facilitate licensing
of the remainder? If so, would such
collective(s) require government
oversight? How might uses now outside
of Section 115, such as music videos
and lyric displays, be accommodated?
Sound Recordings
8. Are there ways in which Section
112 and 114 (or other) CRB ratesetting
proceedings could be streamlined or
otherwise improved from a procedural
standpoint?
International Music Licensing Models

9. International licensing models for
the reproduction, distribution, and
public performance of musical works
differ from the current regimes for
licensing musical works in the United
States. Are there international music
licensing models the Office should look
to as it continues to review the U.S.
system?
Other Issues
10. Please identify any other pertinent
issues that the Copyright Office may
wish to consider in evaluating the music
licensing landscape.
Dated: July 18, 2014.
General Counsel and Associate, Register of
Copyrights.
[FR Doc. 201417354 Filed 72214; 8:45 am]
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17:33 Jul 22, 2014
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42835
Management Services (ACNR), National

Archives and Records Administration,
8601 Adelphi Road, College Park, MD
[NARA2014044]
207406001. Telephone: 3018371799.
Records Schedules; Availability and
SUPPLEMENTARY
INFORMATION: Each year
Federal agencies create billions of
AGENCY: National Archives and Records
records on paper, film, magnetic tape,
Administration (NARA).
and other media. To control this

ACTION: Notice of availability of
accumulation, agency records managers

proposed records schedules; request for
prepare schedules proposing retention
comments.
periods for records and submit these

schedules for NARAs approval. These
SUMMARY: The National Archives and
schedules provide for the timely transfer
Records Administration (NARA)
into the National Archives of
publishes notice at least once monthly
historically valuable records and
of certain Federal agency requests for
authorize the disposal of all other
records disposition authority (records
records after the agency no longer needs
schedules). Once approved by NARA,
them to conduct its business. Some
records schedules provide mandatory
schedules are comprehensive and cover
instructions on what happens to records all the records of an agency or one of its
when no longer needed for current
major subdivisions. Most schedules,
Government business. They authorize
however, cover records of only one
the preservation of records of
office or program or a few series of
continuing value in the National
records. Many of these update
Archives of the United States and the
previously approved schedules, and
destruction, after a specified period, of
some include records proposed as
records lacking administrative, legal,
permanent.
research, or other value. Notice is
The schedules listed in this notice are
published for records schedules in
media neutral unless specified
which agencies propose to destroy
otherwise. An item in a schedule is
records not previously authorized for
media neutral when the disposition
disposal or reduce the retention period
instructions may be applied to records
of records already authorized for
regardless of the medium in which the
disposal. NARA invites public
records are created and maintained.
comments on such records schedules, as Items included in schedules submitted
required by 44 U.S.C. 3303a(a).
to NARA on or after December 17, 2007,
DATES: Requests for copies must be
are media neutral unless the item is
received in writing on or before August
limited to a specific medium. (See 36
22, 2014. Once the appraisal of the
CFR 1225.12(e).)
records is completed, NARA will send
No Federal records are authorized for
a copy of the schedule. NARA staff
destruction without the approval of the
usually prepare appraisal
Archivist of the United States. This
memorandums that contain additional
approval is granted only after a
information concerning the records
thorough consideration of their
covered by a proposed schedule. These, administrative use by the agency of
too, may be requested and will be
origin, the rights of the Government and
provided once the appraisal is
of private persons directly affected by
completed. Requesters will be given 30
the Governments activities, and
days to submit comments.
whether or not they have historical or
ADDRESSES: You may request a copy of
other value.
any records schedule identified in this
Besides identifying the Federal
notice by contacting Records
agencies and any subdivisions
Management Services (ACNR) using one requesting disposition authority, this
of the following means:
public notice lists the organizational
Mail: NARA (ACNR), 8601 Adelphi
unit(s) accumulating the records or
Road, College Park, MD 207406001.
indicates agency-wide applicability in
the case of schedules that cover records
Fax: 3018373698.
that may be accumulated throughout an
Requesters must cite the control
agency. This notice provides the control
number, which appears in parentheses
number assigned to each schedule, the
after the name of the agency which
total number of schedule items, and the
submitted the schedule, and must
number of temporary items (the records
provide a mailing address. Those who
proposed for destruction). It also
desire appraisal reports should so
includes a brief description of the
indicate in their request.
temporary records. The records
schedule itself contains a full
description of the records at the file unit
Margaret Hawkins, Director, Records
NATIONAL ARCHIVES AND RECORDS
ADMINISTRATION
PO 00000
Frm 00081
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E:\FR\FM\23JYN1.SGM
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Federal Register / Vol. 79, No. 148 / Friday, August 1, 2014 / Notices
Total Responses: 1,643.
Average Time per Response: 60
minutes.
Estimated Total Burden Hours: 1,643
hours.
Total Other Burden Cost: $0.
Comments submitted in response to
this request will be summarized and/or
included in the request for Office of
Management and Budget approval; they
will also become a matter of public
record.

at 2027078350.
James H. Moore, Jr.,

Deputy Assistant Secretary for Policy, U.S.
Department of Labor.
I. Background
conducting
a study to assess the
[FR Doc. 201418184 Filed 73114; 8:45 am]
licensing sound recordings and musical
works. The Office received written
comments responding to an initial
LIBRARY OF CONGRESS
Notice of Inquiry, and held three public
roundtables in Nashville, Los Angeles
Copyright Office
and New York. See 78 FR 13739 (Mar.
[Docket No. 201403]
17, 2014); 79 FR 25626 (May 5, 2014).
On July 23, 2014, the Office published
Music Licensing Study
a second Notice of Inquiry, seeking
additional written comments on ten
AGENCY: U.S. Copyright Office, Library
subjects concerning the music licensing
of Congress.
ACTION: Notice of extension of comment

environment. 79 FR 42833. To ensure
commenters have sufficient time to
period.
address the topics set forth in the July

SUMMARY: The United States Copyright
2014 Notice of Inquiry, the Office is
Office is extending the deadline for
extending the time for filing written
public comments regarding the
comments from August 22, 2014 to
effectiveness of existing methods of
September 12, 2014.
licensing music that were solicited in a
July 23, 2014 Notice of Inquiry. See 79
Maria A. Pallante,
FR 42833 (July 23, 2014).
Register of Copyrights.
DATES: Written comments are now due
[FR Doc. 201418096 Filed 73114; 8:45 am]
on or before September 12, 2014.
ADDRESSES: All comments shall be
LIBRARY OF CONGRESS
musiclicensingstudy. The Web site
[Docket No. 201402]
Extension of Comment Period; Study
on the Right of Making Available;
Request for Additional Comments
AGENCY: U.S. Copyright Office, Library

of Congress.

exceed six megabytes (MB) in one of the ACTION: Extension of comment period.

SUMMARY: The U.S. Copyright Office is
contains searchable, accessible text (not extending the deadline for public
comments that address topics listed in
WordPerfect; Rich Text Format (RTF); or the Offices July 15, 2014 Request for
Additional Comments.
DATES
: Comments are now due no later
than 5:00 p.m. EDT on September 15,
2014.
ADDRESSES: All comments should be
on the Offices Web site in the form that submitted electronically. To submit
they are received, along with associated comments, please visit http://
names and organizations. If electronic
www.copyright.gov/docs/making_
submission of comments is not feasible, available/. The Web site interface
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22:09 Jul 31, 2014
Jkt 232001
PO 00000
Frm 00134
Fmt 4703
Sfmt 9990
44871
requires submitters to complete a form

specifying name and organization, as
applicable, and to upload comments as
an attachment via a browser button. To
meet accessibility standards,
commenting parties must upload
comments in a single file not to exceed
six megabytes (MB) in one of the
following formats: a Portable Document
File (PDF) format that contains
searchable, accessible text (not an
image); Microsoft Word; WordPerfect;
Rich Text Format (RTF); or ASCII text
file format (not a scanned document).
The form and face of the comments
must include both the name of the
submitter and organization. The Office
will post all comments publicly on the
Offices Web site exactly as they are
received, along with names and
organizations. If electronic submission
of comments is not feasible, please
contact the Office at 2027071027 for
special instructions.
Maria Strong, Senior Counsel for Policy

and International Affairs, by telephone
at 2027071027 or by email at
mstrong@loc.gov, or Kevin Amer,
Counsel for Policy and International
Affairs, by telephone at 2027071027
or by email at kamer@loc.gov.
On July
15, 2014, the Copyright Office issued a
Request for Additional Comments on
the state of U.S. law recognizing and
protecting making available and
communication to the public rights
for copyright holders.1 The Request
listed several questions for interested
members of the public to address in the
context of U.S. implementation of the
WIPO Copyright Treaty (WCT) and the
WIPO Performances and Phonograms
Treaty (WPPT) rights of making
available and communication to the
public, and also invited views on
specific issues raised during the public
roundtable held in Washington, DC on
May 5, 2014. To provide sufficient time
for commenters to respond, the Office is
extending the time for filing additional
comments from August 14, 2014 to
September 15, 2014.

Karyn A. Temple Claggett,
Associate Register of Copyrights.
[FR Doc. 201418097 Filed 73114; 8:45 am]
1 Study on the Right of Making Available; Request

for Additional Comments, 79 FR 41309 (July 15,
2014).
E:\FR\FM\01AUN1.SGM
01AUN1
co p y r i g h t
appendix b
.s.
co p y r i g h t
o f f i c e
a n d
t h e
m u s i c
commenting parties and

roundtable participants
Parties Who Responded to First Notice of Inquiry

1.
ABKCO Music & Records, Inc. (ABKCO)
2.
American Association of Independent Music (A2IM)
3.
American Society of Composers, Authors and Publishers (ASCAP)
4.
Audiosocket
5.
Barnett III, William
6.
Brigham Young University Copyright Licensing Office
7.
Broadcast Music, Inc. (BMI)
8.
Camp, Ben
9.
Center for Copyright Integrity
10.
Castle, Christian L.
11.
Cate, John
12.
Consumer Federation of America (CFA) and Public Knowledge
13.
Content Creators Coalition
14.
Continental Entertainment Group
15.
Copyright Alliance
16.
Council of Music Creators
17.
CTIA The Wireless Association (CTIA)
18.
Digital Data Exchange, LLC (DDEX)
19.
Digital Media Association (DiMA)
20.
DotMusic
21.
Educational Media Foundation (EMF)
22.
Ferrick, Melissa
23.
Future of Music Coalition (FMC)

1
24.
Gear Publishing Company and Lisa Thomas Music Services, LLC
25.
Geo Music Group & George Johnson Music Publishing
26.
Global Image Works
27.
Greco, Melanie Holland
28.
Harris, Jim
29.
Hayes, Bonnie
30.
Henderson, Linda S.
31.
Herstand, Ari
32.
Indiana University, Archives of African American Music and Culture
33.
Interested Parties Advancing Copyright (IPAC)
34.
Jessop, Paul
35.
Kohn, Bob
36.
LaPolt, Dina
37.
Library of Congress
38.
Lincoff, Bennett
39.
Lowery, David
40.
McAuliffe Esq., Emmett
41.
Menell, Peter S.
42.
Mitchell, John T.
43.
Modern Works Music Publishing
44.
Music Choice
45.
Music Library Association
46.
Music Reports, Inc. (MRI)
47.
National Academy of Recording Arts & Sciences (NARAS)

2
48.
National Association of Broadcasters (NAB)
49.
National Music Publishers' Association (NMPA) and Harry Fox Agency, Inc.
(HFA)
50.
National Public Radio, Inc. (NPR)
51.
National Religious Broadcasters Music License Committee (NRBMLC)
52.
National Religious Broadcasters Noncommercial Music License Committee

(NRBNMLC)
53.
National Restaurant Association
54.
Nauman, Vickie
55.
Newman Esq., Deborah
56.
Netflix, Inc.
57.
Novak, Adam
58.
Pagnani, Aidan
59.
Pala Rez Radio
60.
Pattison, Pat
61.
Public Knowledge and Consumer Federation of America (CFA)
62.
Public Television Coalition (PTC)
63.
Radio Music License Committee, Inc. (RMLC)
64.
Recording Industry Association of America, Inc. (RIAA)
65.
Robin Green, Lynne
66.
Rys, Jason
67.
Schlieman, Derek S.
68.
Screen Actors Guild American Federation of Television and Radio Artists

(SAG-AFTRA) and American Federation of Musicians of the United States and
Canada (AFM)
69.
SESAC, Inc. (SESAC)

3
70.
Shocked, Michelle
71.
Simpson, Jerrod
72.
Sirius XM Radio Inc.
73.
Society of Composers & Lyricists (SCL)
74.
Songwriters Guild of America, Inc. (SGA)
75.
SoundExchange, Inc.
76.
Spotify USA Inc.
77.
SRN Broadcasting
78.
St. James, Charles
79.
Television Music License Committee, LLC (TMLC)
80.
Traugh, David
81.
United States Marine Band
82.
Willey, Robert
83.
Wixen Music Publishing, Inc.
84.
Yates, James M.
Participants in Nashville Hearings

1.
Barker, John (ClearBox Rights and IPAC)
2.
Buresh, Heather (Music Row Administrators Group)
3.
Chertkof, Susan (RIAA)
4.
Coleman, Dan (Modern Music Works Publishing)
5.
Driskill, Marc (Sea Gayle Music and AIMP, Nashville Chapter)
6.
Earls, Kent (UMPG)
7.
Gervais, Daniel (Vanderbilt University Law School)
8.
Gottlieb, Tony (Get Songs Direct, LLC)
9.
Herbison, Barton (NSAI)
10.
Johnson, George (Geo Music Group and George Johnson Music Publishing)
11.
Kass, Fritz (Intercollegiate Broadcasting System, Inc.)
12.
Kimes, Royal Wade (Wonderment Records)
13.
Knife, Lee (DiMA)
14.
Marks, Steven (RIAA)
15.
McIntosh, Bruce (Codigo Music and Fania Records)
16.
Meitus, Robert (Meitus Gelbert Rose LLP)
17.
Mosenkis, Sam (ASCAP)
18.
Oxenford, David (Wilkinson Barker Knauer LLP)
19.
Schaffer, Brittany (NMPA and Loeb & Loeb LLP)
20.
Sellwood, Scott (Google and YouTube)
21.
Soled, Janice (My Music Screen)
22.
Stollman, Marc (Stollman Law, PA)
23.
Turley-Trejo, Ty (Brigham Young University Copyright Licensing Office)
24.
Waltz, Reid Alan (SESAC)

5
Participants in Los Angeles Hearings

1.
Anthony, Paul (Rumblefish)
2.
Arrow, Ed (UMPG)
3.
4.
Bernstein, Keith (Crunch Digital)
5.
Blake, Lawrence J. (Concord Music Group, Inc.)
6.
Bull, Eric D. (Create Law)
7.
Cate, John (American Music Partners)
8.
Cohan, Timothy A. (PeerMusic)
9.
Goldberg, Ilene (IMG Consulting)
10.
Greaves, Deborah (Label Law, Inc.)
11.
Greenstein, Gary R. (Wilson Sonsini Goodrich & Rosati)
12.
Harbeson, Eric (Music Library Association)
13.
Hauth, Russell (Salem Communications and NRBMLC)
14.
Irwin, Ashley (SCL)
15.
Kokakis, David (UMPG)
16.
Kossowicz, Tegan (UMG)
17.
LaPolt, Dina (Dina LaPolt P.C.)
18.
Lemone, Shawn (ASCAP)
19.
Lipsztein, Leonardo (Google and YouTube)
20.
Lord, Dennis (SESAC)
21.
22.
Menell, Peter (UC Berkeley School of Law)
23.
Miller, Jennifer (Audiosocket)
24.
Muddiman, Hlne (Hollywood Elite Composers)

6
25.
Nauman, Vickie (CrossBorderWorks)
26.
Prendergast, Brad (SoundExchange, Inc.)
27.
Rudolph, John (Music Analytics)
28.
Rys, Jason (Wixen Music Publishing, Inc.)
29.
Sanders, Charles J. (SGA)
30.
Schyman, Garry (SCL)
31.
Watkins, Les (MRI)
Participants in New York Hearings

1.
Albert, Eric (Stingray Digital Group)
2.
Badavas, Christos P. (HFA)
3.
4.
Barron, Gregg (BMG Rights Management)
5.
Bengloff, Richard (A2IM)
6.
Bennett, Jeffrey (SAG-AFTRA)
7.
Besek, June (Columbia Law School, Kernochan Center for Law, Media and the
Arts)
8.
Carapella, Cathy (Global Image Works)
9.
Carnes, Rick (SGA)
10.
Coleman, Alisa (ABKCO)
11.
Conyers III, Joe (Downtown Music Publishing)
12.
DeFilippis, Matthew (ASCAP)
13.
Diab, Waleed (Google and YouTube)
14.
Donnelley, Patrick (Sirius XM Radio Inc.)
15.
Duffett-Smith, James (Spotify USA Inc.)
16.
Dupler, Todd (NARAS)
17.
Fakler, Paul (NAB and Music Choice)
18.
Finkelstein, Andrea (SME.)
19.
Gibbs, Melvin (Content Creators Coalition)
20.
Greer, Cynthia (Sirius XM Radio Inc.)
21.
Griffin, Jodie (Public Knowledge)
22.
Hoyt, Willard (TMLC)
23.
Huey, Dick (Toolshed Inc.)

8
24.
Kass, Fritz (Intercollegiate Broadcasting System, Inc.)
25.
Knife, Lee (DiMA)
26.
Kohn, Bob (Kohn on Music Licensing)
27.
Lee, Bill (SESAC)
28.
Lummel, Lynn (ASCAP)
29.
Mahoney, Jim (A2IM)
30.
Malone, William (Intercollegiate Broadcasting System, Inc.)
31.
Marin, Aldo (Cutting Records, Inc.)
32.
33.
Merrill, Tommy (The Press House and #IRespectMusic)
34.
Morgan, Blake (ECR Music Group and #IRespectMusic)
35.
Potts, Cheryl (Crystal Clear Music & CleerKut)
36.
Rae, Casey (FMC)
37.
Raff, Andrew (Shutterstock, Inc.)
38.
Raffel, Colin (Prometheus Radio Project)
39.
Reimer, Richard (ASCAP)
40.
Resnick, Perry (RZO, LLC)
41.
Rich, Bruce (RMLC)
42.
Rinkerman, Gary (Drinker, Biddle & Reath LLP)
43.
Rosen, Stuart (BMI)
44.
Rosenthal, Jay (NMPA)
45.
Rushing, Colin (SoundExchange, Inc.)
46.
Steinberg, Michael G. (BMI)
47.
Wood, Doug (National Council of Music Creator Organizations)
Parties Who Responded to Second Notice of Inquiry

1.
ABKCO Music & Records, Inc. (ABKCO)
2.
American Association of Independent Music (A2IM)
3.
American Society of Composers, Authors and Publishers (ASCAP)
4.
Bean, David
5.
Broadcast Music, Inc. (BMI)
6.
Buckley, William Jr.
7.
Carapetyan, Gregory
8.
Castle, Christian L.
9.
Columbia Law School, Kernochan Center for Law, Media and the Arts
10.
Computer & Communications Industry Association (CCIA)
11.
Concord Music Group, Inc.
12.
Content Creators Coalition
13.
Deutsch, L. Peter
14.
Digital Media Association (DiMA)
15.
Future of Music Coalition (FMC)
16.
Geo Music Group & George Johnson Music Publishing
17.
Guyon, Cindy
18.
Guyon, Rich
19.
Interested Parties Advancing Copyright (IPAC)
20.
LaPolt, Dina
21.
Modern Works Music Publishing
22.
Music Choice
23.
Music Managers Forum (MMF) and Featured Artists' Coalition (FAC)
24.
Music Reports, Inc. (MRI)

10
25.
Nashville Songwriters Association International (NSAI)
26.
National Academy of Recording Arts & Sciences (NARAS)
27.
National Association of Broadcasters (NAB)
28.
National Music Publishers' Association (NMPA) and Harry Fox Agency, Inc.
(HFA)
29.
National Public Radio, Inc. (NPR)
30.
Office of the County Attorney, Montgomery County, Maryland
31.
Pangasa, Maneesh
32.
Parker, Brad
33.
Pilot Music Business Services, LLC
34.
Pipeline Project 2014, Belmont University's Mike Curb College of Music Business
and Entertainment
35.
Production Music Association (PMA)
36.
Public Knowledge
37.
Radio Music License Committee, Inc. (RMLC)
38.
Recording Industry Association of America, Inc. (RIAA)
39.
Resnick, Perry (RZO, LLC)
40.
Righeimer, Carolyn
41.
Rinkerman, Gary (Drinker, Biddle & Reath LLP)
42.
Samuels, Jon M.
43.
Screen Actors Guild American Federation of Television and Radio Artists

(SAG-AFTRA) and American Federation of Musicians of the United States and
Canada (AFM)
44.
Sirius XM Radio Inc.
45.
Songwriters Guild of America, Inc. (SGA)
46.
SoundExchange, Inc.
47.
Stone, Bob
11
48.
Szajner, Robert
49.
Television Music License Committee, LLC (TMLC)
50.
U.S. Chamber of Commerce, Global Intellectual Property Center (GIPC)
51.
Wager, Gregg
12
co p y r i g h t
appendix c
.s.
co p y r i g h t
o f f i c e
abbreviations
a n d
t h e
m u s i c
ABBREVIATIONS
A2IM
American Association of Independent Musicians
ABKCO
ABKCO Music & Records, Inc.
AFM
American Federation of Musicians of the United States and Canada
AHRA
Audio Home Recording Act
AIMP
Association of Independent Music Publishers
ASCAP
American Society of Composers, Authors and Publishers
BMI
Broadcast Music, Inc.
BYU
Brigham Young University Copyright Licensing Office
CARP
Copyright Arbitration Royalty Panel
CCIA
Computer & Communications Industry Association
CFA
Consumer Federation of America
CISAC
International Confederation of Societies of Authors and Composers
CRB
Copyright Royalty Board
CRT
Copyright Royalty Tribunal
CTIA
CTIAThe Wireless Association
DDEX
Digital Data Exchange, LLC
DiMA
Digital Media Association
DMCA
Digital Millenium Copyright Act
DOJ
United States Department of Justice
DPD
Digital phonorecord delivery
DPRSRA
Digital Performance Right in Sound Recordings Act
EMF
Educational Media Foundation
EMI
EMI Music Publishing Ltd.
FAC
Featured Artists Coalition
FMC
Future of Music Coalition
FTC
United States Federal Trade Commission
GMR
Global Music Rights
GMRO
General music rights organization
GIPC
U.S. Chamber of Commerce, Global Intellectual Property Center
GRD
Global Repertoire Database
HFA
Harry Fox Agency, Inc.
IFPI
International Federation of the Phonographic Industry
IMR
International Music Registry
ISNI
International Standard Name Identifier
IPAC
Interested Parties Advancing Copyright
IPI
Interested Parties Information
ISO
International Organization for Standardization
ISRC
International Standard Recording Code
ISWC
International Standard Musical Work Code
MMF
Music Managers Forum
MRI
Music Reports, Inc.
MRO
Music rights organization
Music Biz
Music Business Association
NAB
National Association of Broadcasters
NARAS
National Academy of Recording Arts & Sciences
NCTA
National Cable & Telecommunications Association
NDMA
New digital media agreement
NMPA
National Music Publishers Association
NOI
Notice of Intent
NPR
National Public Radio, Inc.
NRBMLC
National Religious Broadcasters Music License Committee
NRBNMLC
National Religious Broadcasters Noncommercial Music License

Committee
NSAI
Nashville Songwriters Association International
NTIA
National Telecommunications and Information Administration
PPL
Phonographic Performance Ltd.
PRO
Performing rights organization
PTC
Public Television Coalition
RESPECT Act
Respecting Senior Performers as Essential Cultural Treasures Act
RMLC
Radio Music License Committee, Inc.
RIAA
Recording Industry Association of America, Inc.
SAG-AFTRA
Screen Actors Guild-American Federation of Television and Radio Artists
SCL
Society of Composers & Lyricists
SEA
Songwriters Equity Act
SGA
Songwriters Guild of America, Inc.
SIRA
Section 115 Reform Act of 2006
SME
Sony Music Entertainment, Inc.
Sony/ATV
Sony/ATV Music Publishing LLC
SOCAN
Society of Composers, Authors and Music Publishers of Canada
TMLC
Television Music License Committee, LLC
UMG
Universal Music Group
UMPG
Universal Music Publishing Group
UPC
Universal Product Code
USPTO
U.S. Patent and Trademark Office
WIPO
World Intellectual Property Organization
WMG
Warner Music Group
co p y r i g h t
appendix d
.s.
co p y r i g h t
o f f i c e
a n d
t h e
m u s i c
licensing and ratesetting charts
Copyright and the Music Marketplace:
Existing Licensing Framework

Musical Work
Musical works
Sound recordings
publishers/songwriters
Synch
rights,
etc.
Reproduction and distribution

(mechanical) rights
Publishers
directly
Publishers
directly or
through
labels
Traditional media
(TV, film, etc.)
and new media
(internet, etc.)
Downloads,
interactive streaming,
CDs, etc.
record labels/artists
Public performance rights
Statutory
notice
Traditional media
(radio, TV, etc.)
and new media
(internet, etc.)
Live
Synch
rights,
etc.
Reproduction and
distribution rights,
and public
performance
rights for digital
interactive
Labels
directly
Labels
directly
Traditional
media
(TV, film, etc.)
and new media
(internet, etc.)
Downloads,
interactive
streaming,
CDs, etc.
Public
performance
rights for
digital
noninteractive
Public
performance
rights for
terrestrial
(AM/FM)
radio
No federal
performance
right
Internet and
satellite
radio, etc.
Proposed Licensing Framework

Musical works
Sound recordings
Synch
rights,
etc.
Mechanical and
public performance
rights subject
to withdrawal

(mechanical) and
public performance rights
Synch
rights,
etc.
Reproduction and
distribution rights, and
public performance
rights for
digital interactive
Publishers
directly
Publishers
directly
MROs and GMRO
Labels
directly
Labels
directly
Traditional media
(TV, film, etc.)
and new media
(internet, etc.)
Downloads
and interactive
streaming
Traditional media
(TV, film, etc.)
and new media
(internet, etc.)
Downloads,
interactive streaming,
CDs, etc.
Physical
products
(CDs, etc.)
Traditional media
(radio, TV, etc.)
and new media
(internet, etc.)
Live
Public
performance
rights for digital
noninteractive
and terrestrial
Internet, satellite
and terrestrial
(AM/FM)
radio, etc.
Existing Ratesetting Framework

Musical works
Sound recordings
Public
performance
rights
Works
subject to
ASCAP/BMI
consent
decrees
Reproduction and
distribution
(mechanical) rights
Synch
rights, etc.

rights, public performance
rights for digital interactive,
synch rights, etc.
Works not
subject to
ASCAP/BMI
consent
decrees
Reasonable
rate
Federal district court

(rate courts)
Public performance
rights for digital
noninteractive
Satellite radio
and preexisting
subscription
services
Rates negotiated in the

free market
801(b)(1) factors
Willing buyer/
willing seller
Internet radio
and new
subscription
services
Proposed Ratesetting Framework

Musical works
Sound recordings
Reproduction and
distribution (mechanical)
and public performance
rights (MRO- and GMROadministered)
Mechanical and public

performance rights
subject to withdrawal,
synch rights, etc.
Reproduction and
distribution rights,
public performance rights
for digital interactive,
synch rights, etc.
Rates negotiated in the

free market
Marketoriented standard
(e.g., willing buyer/willing seller)

(as needed)
Public performance rights for

noninteractive (internet,
satellite, and terrestrial
(AM/FM) radio, etc.)
u.s.copyrightoffice libraryofcongress 101independenceavenuese washington,dc20559-6000 www.copyright.gov

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Copyright and The Music Marketplace

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Copyright:

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u n i t e d

Copyright and the Music Marketplace

Copyright and the Music Marketplace

B. Licensing and Ratesetting Charts

Music Licensing Landscape

Copyright and New Use Technologies,23NOVAL.REV.659,664(1999).

SeeMariaA.Pallante,ASCAP at 100,61J.COPYRIGHT SOCY545,54546(2014).

ActofMar.3,1897,ch.392,29Stat.694;see alsoZviS.Rosen,The Twilight of the Opera Pirates: A

Pub.L.No.92140,85Stat.391(1971)(SoundRecordingActof1971);see generally PRE1972

2. Musical Works Versus Sound Recordings

3. Key Players in the Music Marketplace

DONALDS.P ASSMAN, ALLYOUNEED TOKNOW ABOUTTHEM USICBUSINESS220(8thed.2013)

See generallyALKOHN &BOBKOHN, KOHNONM USICLICENSING 32944(4thed.2010)

See EdChristman,FirstQuarter Music Publishing Rankings: SONGS Surges Again,BILLBOARD

NateRau,New Nashville Group to Push for Copyright Reform,THETENNESSEAN(May25,2014),

c. Performing Rights Organizations (PROs)

SeeBenSisario,Pandora Suit May Upend CenturyOld Royalty Plan,N.Y.TIMES(Feb.13,2014),

SeeChrisVersace,The Future of Streaming Music Rests With Congress,FOXBUSINESS(June23,

GailMitchell,andAndrewHampp,Pharrell to Leave ASCAP for Irving and Grimmets Global Music

Royalties for Songwriters,N.Y.TIMES(Oct.29,2014),http://www.nytimes.com/2014/10/30/

musicalworkthatislikelytobeperformedsoon.See United States v. ASCAP,No.411395,2001

Decree);United States v. BMI, No.64civ3787,1966U.S.Dist.LEXIS10449, 1966TradeCas.

(CCH)71,941,V(S.D.N.Y.1966),as amended by,1994U.S.Dist.LEXIS21476, 19961TradeCas.

d. Mechanical Rights Administrators

e. Recording Artists and Producers

Licensee, HARRYFOX AGENCY,http://www.harryfox.com/license_music/become_hfa_

SeeSound Recordings at a Glance,SAGAFTRA,http://www.sagaftra.org/files/sag/

SeeDanDaley,Points of Survival: Producers Adapt to a New Economic Landscape in the Music

About Us,FUTUREOF M USICCOALITION ,https://www.futureofmusic.org/about(lastvisitedJan.

GlennPeoples,SoundExchange Distributes Record $153 Million in Q3, Celebrates 10Year

B. Licensing Musical Works

See Buffalo Broad. Co., Inc., v. ASCAP,744F.2d917,920(2dCir.1984)(Thesynchrightisa

copyrightowner.(citing17U.S.C.106(1)));Agee v. Paramount Commcns, Inc.,59F.3d317,321

2. Reproduction and Distribution Rights

WhiteSmith Music Publg Co. v. Apollo Co.,209U.S.1,89,1718(1908).

H.R.REP.NO.602222,at68(1909);see alsoMiller v. Goody,139F.Supp.176,182(S.D.N.Y.

b. Mechanical Rights Licensing

soundrecordingcopyrightownersinthecontextofcertaindigitaltransmissions.); see also17

W.JonathanCardi,berMiddleman: Reshaping the Broken Landscape of Music Copyright,92IOWA

See generallyCopyrightModernizationActof2006,H.R.6052;SkylaMitchell,Reforming Section

3. Public Performance Rights

(Reforming Section 115 Hearing)(statementofRep.HowardCoble).

(Copyright Office Views on Music Licensing Reform Hearing)(statementofMarybethPeters,

SeeSteveWilf,The Making of the PostWar Paradigm in American Intellectual Property Law,31

BMI v. CBS,441U.S.1,45(1979); see alsoAldenRochelle, Inc. v. ASCAP,80F.Supp.888,891

BMI v. CBS,441U.S.at45; see alsoAldenRochelle,80F.Supp.at891.

Meredith Corp.,1F.Supp.3dat190;BMI v. CBS,441U.S.at5.

See generallyLaurenM.Bilasz,Note: Copyrights, Campaigns, and the Collective Administration of

Performance Rights: A Call to End Blanket Licensing of Political Events,32CARDOZOL.REV.305,323&

Id.;see alsoNetflixFirstNoticeCommentsat12;ASCAP Reports Increased Revenues in 2011,

Arizona v. Maricopa Cnty. Med. Socy,457U.S.332,34243(1982).

Associated Press v. United States,326U.S.1,27(1945).

N. Pac Ry. Co. v. United States,356U.S.1,5(1958).

Eastman Kodak Co. v. Image Technical Servs., Inc.,504U.S.451,4662(1992).

Tying the Sale of Two Products,FTC,http://www.ftc.gov/tipsadvice/competitionguidance/

See generally United States v. BMI,275F.3d168,17172(2dCir.2001)(describingthehistory);see

ChristianSeyfert,Copyright and AntiTrust Law: Public Performance Rights Licensing of Musical

Audiovisual Mediaat22;see also BMIConsentDecree.

Antitrust Consent Decree Review,U.S.DOJ,http://www.justice.gov/atr/cases/ascapbmidecree

Antitrust Consent Decree Review,U.S.DOJ,http://www.justice.gov/atr/cases/ascapbmidecree

Buffalo Broad. v. ASCAP,744F.2dat92632;see also id.at934(Winter,J.,concurring)([S]olong

In re Pandora Media, Inc.,Nos.12cv8035,41cv1395,2013WL5211927,at*2(S.D.N.Y.Sept.17,

2013);BMI v. Pandora Media, Inc.,Nos.13cv4037,64cv3787,2013WL6697788,at*23(S.D.N.Y.

Capitol Records, Inc. v. MP3tunes, LLC,No.07cv9931,2012WL242827,at12(S.D.N.Y.Jan.9,